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British investors are spoilt for choice because they have two ways of investing in a tax-efficient way, either in a Self-Invested Personal Pension (SIPP) or a Stocks and Shares ISA. So spoilt, in fact, that many struggle to decide which to use.
Both offer attractive but markedly different tax breaks. I decided to call in help from ChatGPT, and asked it whether someone with £20,000 to invest in 2026 would be better off with a SIPP or ISA.
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.
Tax-efficient investing
I would never use artificial intelligance to pick shares or populate a portfolio. That’s not what it’s for. But I thought it should be reasonably competent on technical questions like this. So which tax shelter does the heavy lifting?
ChatGPT went straight to the big attraction of a SIPP, generous tax relief on contributions. A basic-rate 20% taxpayer only needs to contribute £16,000 to end up with £20,000 invested, while 40% higher-rate taxpayers can reclaim another £4,000 through their tax return. That’s a powerful start.
The trade-off is access. Pension money is locked away until at least age 55, rising to 57 from 2028. At retirement, 25% can be taken tax-free, but the rest will be taxed as income.
There’s no tax relief when investing in a Stocks and Shares ISA, but tax-free withdrawals can be made at any age. Both wrappers shelter investments from dividend tax and capital gains tax, helping wealth compound.
ChatGPT ran through the options nicely, but then I intervened. To me, I think the tax breakes complement each other so nicely, it could make sense to use them both. That way investors get tax relief on half their contributions, thanks to the SIPP, and can take half their returns free of tax, courtesy of the Stocks and Shares ISA.
GSK shares tempt me
AI definitely isn’t for stock picking, as ChatGPT is first to admit. So this bit is me. Right now, I think investors — whether using a SIPP or an ISA — might like to consider FTSE 100 pharmaceuticals giant GSK (LSE: GSK). After years of frustration, GSK finally came good in 2025, with the shares ending roughly 38% higher. The trailing dividend yield of 3.35% is forecast to hit 3.9% in 2026.
Despite the recovery, the valuation still looks reasonable. The price-to-earnings ratio sits at 11.4. That’s not demanding for a global healthcare group with a long history and defensive qualities.
Much depends on what’s already in the portfolio. Anyone heavily exposed to pharmaceuticals through rival AstraZeneca may decide to pass. For those without healthcare exposure, GSK could add balance and diversification.
Risks and resilience
There are risks. Former chief executive Emma Walmsley set ambitious revenue targets for 2030, which may be tough to reach. Several key HIV patents expire in 2028 and 2029, and US vaccination policy remains uncertain.
Still, confidence is improving. In February 2025, GSK announced its first share buyback since 2013, worth £2bn. With a broad pipeline and dependable income, investors might consider buying as part of a long-term, diversified portfolio.
No single share is perfect, just as no single tax wrapper does everything. Investors should build a balanced portfolio of at least a dozen shares, and do their own research, rather than relying on AI.
