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A Stocks and Shares ISA is one of the easiest ways to invest tax efficiently, but deciding between it and a Self-Invested Personal Pension (SIPP), isn’t straightforward. Both tax umbrellas are useful, but in different ways. So which is better? I decided to ask ChatGPT.
I’ve found artificial intelligence pretty much useless for helping me pick stocks, but I wondered if it would be better on technical questions like this one. I told it an investor had £10k to invest. Here’s what it said.
Tax relief and flexibility
It told me a SIPP gives upfront tax relief so a basic-rate 20% taxpayer only needs to invest £8,000 to put away £10,000. Higher-rate 40% taxpayers can claim further relief through their tax return. The catch is the money can’t be accessed until age 55 (or 57 from 2028). At retirement, 25% can be taken tax-free. The remainder is subject to income tax.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Stocks and Shares ISAs don’t provide upfront tax relief on contributions, ChatGPT noted. “However, withdrawals are completely tax-free and can be made at any age.”
But I already knew that. I also knew the next bit it told me: “Both vehicles allow investments in shares, funds, and ETFs without capital gains tax or dividend tax. SIPPs suit higher earners aiming to reduce income tax, whereas ISAs are better for flexible access and earlier financial freedom.”
In my view, using both together works best, the chatbot concluded. “The tax benefits complement each other and can help build wealth from a balanced portfolio of FTSE 100 and FTSE 250 shares.”
Steady, long-term growth
Am I any the wiser? Not really, as I haven’t learnt anything new. But now for the exciting bit. Picking the shares, which I can do without AI’s help. There are loads of dividend stocks to choose from yet I think housebuilder Barratt Redrow (LSE: BTRW) is worth highlighting. Its struggled recently, along with the rest of the sector, falling 18% in a year and 42% over 12 years. What went wrong?
Rising labour and material costs, higher employer’s National Insurance and Minimum Wage obligations, drove up costs, while the cost-of-living crisis and higher mortgage rates squeezed demand.
Yet I think Barratt Redrow has recovery potential. Interest rates are retreating and should fall further next year, cutting mortgage costs and boosting the housing market. The shares look good value, with a price-to-earnings ratio of 14.3.
Dividend income remains reasonable, with a trailing yield of 4.84%. I should warn that Barratt Redrow slashed the dividend per share by more than half in 2024, from 33.7p to 16.2p. But it’s now recovering with a total dividend of 17.6p in 2025, an increase of 8.64%. Patience is required while waiting for the property market and economy to improve but, over the long term, income could accumulate steadily.
Barratt Redrow’s well worth considering but income-focused investors might also want to check out rival Taylor Wimpey, which has a trailing yield of more than 9%.
Diversification matters
Over time, investors should aim to build a spread of at least a dozen shares across sectors and risk profiles. Using both a SIPP and a Stocks and Shares ISA can maximise the substantial tax benefits. There are loads more FTSE shares to consider right now, so regardless of the tax wrapper, don’t hang around!
