Having £20,000 set aside gives you a great chance to put your money to work. Whether that money’s come from inheritance, savings, a bonus (or something else!), it’s a valuable sum to work with — especially when you’re planning to grow your money by investing.
Still, knowing what to do with this chunk of change can seem intimidating.
From competing aspirations to analysis paralysis, we’re here to help you figure out what works for you.
By walking through your long-term goals and the different growth options, you can identify the best way to invest £20,000 based on your personal circumstances.
Jump straight to it here:
- Should I save or invest £20,000?
- Where to invest £20,000
- Investing in a Stocks and Shares ISA
- Investing in a SIPP
- Investing in a GIA
- DIY vs managed portfolios
- Types of investments
- The risks of investing
- Top tips for investing
- Summary
Should I save or invest £20,000?
Investing can be an exciting prospect. But it also comes with risk — which is why you should make sure you’re in a secure financial position before taking the plunge.
Your general financial health is a good place to start.
For example, many people say you should only start investing when you’re free from high-interest debt (such as credit card debts or payday loans).
Equally, it’s also worth looking at your readiness should you encounter unforeseen financial problems. An emergency fund is a great way to give you peace of mind and breathing room, should something crop up (from a job loss to medical bills).
Typically, 3-6 months' worth of expenses is a good rule of thumb for an emergency fund; having this in place before you start investing protects you from having to make rash decisions.
Ultimately, investing is best approached as a long-term pursuit, as the value of your investment can go both up and down. The longer you invest, the more time you have to bounce back from the downs — and maximise your growth.
With that cleared up, you can then decide whether saving or investment is the best port of call when deciding what's the best way to invest money.
Saving
We’re all familiar with the idea of saving, but that doesn’t mean there’s one way to approach it.
Generally, saving is an avenue taken by people with short to –medium-term financial goals. Think of things like travelling, starting a family, or buying property.
Accounts like Cash ISAs – a type of “tax wrapper” – offer a tax-free way for you to earn interest on your savings.
Options range from fixed-rate accounts (which can help you lock in higher returns over a set term) to variable-rate and easy access Cash ISAs, which offer more flexibility and instant access to funds (without penalties on withdrawals).
Flexible Cash ISAs (like the one we offer here at Wealthify) also allow you to withdraw and redeposit money within the same tax year, without impacting your annual £20,000 ISA allowance.
Of course, one of the biggest benefits of savings versus investment is generally considered to be capital protection. In other words, your money isn’t at risk and you get guaranteed returns, making it ideal for emergency funds or upcoming expenses.
However, the downside is that interest rates may not keep up with inflation, meaning the real value of your savings could still shrink over time.
Investing
So, what about investing?
In contrast to saving, investing is a long-term game.
That’s because it involves putting money into assets like shares or bonds, which can lead to shorter-term fluctuation, depending on market performance.
While this introduces risk, it also presents the opportunity for higher returns over time, particularly if you leave your investments to grow over several years.
What’s more, this approach could help you beat inflation.
For example, historical data shows that:
- The FTSE 100 (an index of the 100 largest UK companies) has returned an average of 4.3% per year over the past 10 years.
- The S&P 500 (which tracks 500 of the top US companies) has delivered average annual returns of around 12.2% over the last 10 years. [1]
Much like a Cash ISA, a Stocks and Shares ISA (sometimes called an Investment ISA) is a tax-efficient way to grow money. However, in this investment context, it’s any profits made from your investments which are tax-free.
You also don’t need to be an investing expert to get started.
Many providers like Wealthify offer ready-made Investment Plans tailored to your risk level (ranging from cautious to adventurous).
Still unsure? We break this down in more detail in our blog: Should I save or invest my money?
Where to invest £20,000
When it comes to investing, you’ve got plenty of options.
You might want to invest all £20,000 in one place, or spread it across different areas to suit your goals and timeframes. Options include:
- A Stocks and Shares ISA
- A Self-Invested Personal Pension (SIPP)
- A General Investment Account (GIA)
Let’s dive into the pros and cons of each below.
Investing in a Stocks and Shares ISA
As we touched on earlier, a Stocks and Shares ISA lets you invest your money, while keeping any gains you make tax-free.
In a nutshell, an Investment ISA provides a simple, flexible way to invest that helps you hold onto more of the financial growth you may see over time.
At Wealthify, our Investment ISAs are flexible.
This means you can withdraw money and replace it within the same tax year, without affecting your annual ISA allowance — giving you more control over your money.
How much can you invest in an ISA
You’ll naturally be wondering how much can be invested in an ISA.
The ISA allowance for the 2025/26 tax year remains at £20,000.[2]
This means you can invest up to that amount in a Stocks and Shares ISA (or other type of ISA) and pay no tax on your returns.
You don’t need to use the full allowance, but if you’re in a position to invest the whole £20,000, then you’ll get the most benefit out of this tax break.
It’s also worth remembering that you can split your allowance across different types of ISAs; for example, part in a Stocks and Shares ISA and the rest in a Cash ISA.
Plus, the sooner you invest, the longer your money has to potentially grow and compound — which is when. your profits start to snowball by earning profits of their own.
Investing in a SIPP
For most of us, work fills the majority of our adult lives.
And that’s why retirement marks not just the end of work, but a period of future freedom.
Of course, that means it requires money, too.
That’s why, if you’re thinking more long-term, a Self-Invested Personal Pension (SIPP) could be a great way to grow your pension when looking where to invest 20,000.
One of the biggest benefits is tax relief.
For example, if you contribute £800, the government adds £200, giving you £1,000 in your pension. Higher and additional-rate taxpayers could receive even more via their self-assessment tax return.
Just be aware that money in a SIPP is locked away until age 55 (rising to 57 in 2028).[3]
So, while it could be good for your future, it’s not ideal if you need access to your cash sooner.
Of course, it’s always worth remembering that, with investing, your capital is at risk, and your tax treatment will depend on your individual circumstances (which may change in the future).
Investing in a GIA
If you’ve already hit your maximum isa investment by using up the £20,000 allowance, a General Investment Account (GIA) is another option for investing extra money.
With a GIA, there’s no limit on how much you can invest.
However, unlike an ISA or pension, you will pay tax on any income or capital gains above your annual allowances. Still, GIAs are a useful option if you want to keep investing after maxing out your tax-free wrappers.
And with Wealthify, you can set up and manage a GIA just as easily as an ISA, giving you full oversight of your investments – and their performance – in one place.
DIY vs managed portfolios
Another decision you’ll need to make is whether to manage your investments yourself, or go with a managed portfolio.
DIY investing gives you full control over choosing what to invest in and when to buy or sell. But it also requires time, research, and confidence in your decisions.
Managed investing – which is what Wealthify offers – means experts take care of your portfolio for you. You simply choose your risk level, then we build and manage a diversified Investment Plan on your behalf.
Take some time to consider what suits your lifestyle and long-term goals.
Do you enjoy researching markets and making investment choices? Or would you rather leave it to the experts, and free up your time?
As always, there’s no one right answer — only what’s right for you.
Types of investments
When you invest, you can choose from a wide range of assets. Here are a few common options:
- Shares: Ownership in individual companies.
- Bonds: Loans to governments or companies with regular interest payments.
- Mutual Funds: Pooled investments managed by professionals.
- ETFs (Exchange-Traded Funds): Funds that trade like shares and track an index or theme.
- REITs: Real estate investment trusts which give you exposure to property markets.
At Wealthify, our portfolios combine a wide mix of these assets (what’s known as a diversified portfolio) tailored to your risk level and goals.
If you’re managing your investment portfolio yourself, you’ll need to figure out what assets work with you and your long-term goals.
The risks of investing
Before embarking on an investment journey, you should always remember that the value of your investments can go down as well as up, and you may get back less than you originally put in.
Still, here are a few key things to keep in mind, in order to invest strategically:
- Market volatility is normal. Don’t panic during short-term dips, as it’s all a natural part of the process.
- Diversification helps manage risk. Spreading your money across different assets and regions can help cushion losses, as your money is balanced on a range of assets.
- Long-term focus is key. The longer you invest, the more time you give your money to recover from market downturns and grow. In turn, this could improve your chances of meeting your financial goals in the future.
If you’re ever unsure or in need of advice, consider speaking to a qualified financial adviser.
Top tips for investing
There’s no silver bullet for getting investing right, but a few solid tips can certainly stand you in good stead. Let’s take a look at a few key pointers:
- Start with your goals. What are you investing for, and when will you need the money? Knowing where you hope to be, in the big picture, can help you design an investing strategy to fit your ultimate vision and goals.
- Stay diversified. Spread investment risk by diversifying your portfolio.
- Think long term. Patience is often rewarded when it comes to investing. As covered earlier, for shorter-term goals, you may want to try saving instead. Generally, a minimum of five years or is considered a good starting point for trying to grow your money through investments.
- Avoid emotional decisions. Markets rise and fall, and the worst thing you can do is respond in a reactive manner. Holding your nerve and staying the course could benefit you in the long term.
- Review regularly. While you don’t want to make reactive decisions, that doesn’t mean you shouldn’t regularly review your Investment Plan to make sure it still aligns with your goals!
Summary
The options for investing £20,000 are numerous — and what works for you will depend on a variety of factors.
Here are the key points:
- Using your full ISA allowance is one way to either save or invest £20,000, and it comes with the added benefit of tax-free interest/returns.
- For those thinking big picture, saving money in a SIPP can be a great way to build towards the retirement you want, with the added bonus of generous government tax relief.
- If you go beyond your ISA allowance, you can still invest with a General Investment Account (GIA) and keep growing your wealth. Just remember that a GIA doesn’t have the benefits of a tax wrapper.
No matter how or where you decide to invest, choosing Wealthify means leaving the heavy lifting to us. Our team of experts build and manage your portfolio based on your goals and risk level, so you can sit back, relax — and let your money do the hard work for you.
Your tax treatment will depend on your individual circumstances, and it may be subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.
Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing.
