Tax, fees & accounts
Tax wrapper
Also called ISA, SIPP, 401(k) or IRA
An account type that shelters investments from some or all tax.
How it works
Names and rules vary by country, and the structures fall into two broad families: contributions taxed now and growth free afterwards, or contributions relieved now and withdrawals taxed later.
Using available allowances is usually the single highest-value action a private investor can take, because the benefit is certain while investment returns are not.
Where it misleads people
Wrappers come with contribution limits, access restrictions and withdrawal rules. Money in a pension is genuinely locked away, and that is a real cost alongside the tax benefit.
Related terms
- Capital gains taxTax on the profit made when you sell an investment for more than you paid.
- Income tax on investmentsTax on dividends and interest, usually charged in the year received.
- CompoundingEarning returns on the returns you already earned, so growth accelerates the longer you leave it alone.
- Withholding taxTax deducted at source by a foreign country before a dividend reaches you.
More in Tax, fees & accounts
- Tax-loss harvesting
- Stamp duty
- Wash sale
- Platform fee
- Average cost
- FIFO and other lot methods
- Currency conversion fee
All 11 Tax, fees & accounts terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.