With Mario Compagnoni of Investing in the UK, we wondered what might be profitable financial instruments in Italy and the UK...
We answered this question together and in an increasingly international context, we analysed two instruments, ISAs (UK) and PIRs (Italy). For those who live, work or invest between the UK and Italy, understanding the tax-efficient instruments available in the different systems is a strategic step to optimise wealth growth in the medium and long term.
In the UK, the Individual Savings Accounts (ISAs) are the mainstay of tax-free savings and investments.
In Italy, a similar role is played by the Piani Individuali di Risparmio (PIR), designed to channel capital into the real economy by offering significant tax benefits.
Although with different logics and constraints, both instruments share a key objective: maximising net returns through tax efficiency.
Individual Savings Accounts (ISA): the pillar of tax-free savings in the UK
In the UK financial landscape, ISAs are savings and investment accounts designed to incentivise wealth accumulation by offering total tax exemption.
What is an ISA
An Individual Savings Account allows you to accumulate capital without paying taxes on:
- interest generated by cash
- income from investments
- capital gains
A central aspect is that the tax-free status does not expire: funds remain protected from taxation as long as they remain within the ISA, even for many years. Furthermore, there is no need to declare ISA returns in the Self Assessment tax return, greatly simplifying tax administration.
Main types of ISA
There are currently four main categories:
Cash ISA
Designed for liquid, low-risk savings, offered by banks, building societies or NS&I.
It is suitable for those who value capital stability over yield.
Annual limit included in the overall ceiling of £20,000.
From 2027, the specific limit of the Cash ISA will be reduced to £12,000.
Stocks and Shares ISA
Dedicated to investments in the financial markets. Allows you to invest in:
- actions
- mutual funds
- ETF
- investment trust
- government and corporate bonds
It is the most widely used instrument for long-term capital growth.
Innovative Finance ISA
Aimed at alternative investments such as:
- peer-to-peer lending
- crowdfunding and debentures
It has higher risk profiles and is a more specialised solution.
Lifetime ISA (LISA)
Hybrid solution, cash or invested.
Accessible between the ages of 18 and 40, with contributions of up to £4,000 per year.
It provides a government bonus of 25%, up to £1,000 per year.
Can only be used for:
- purchase of first home up to £450,000
- retirement from age 60
Withdrawals for other purposes carry significant penalties.
Junior ISA (JISA)
Dedicated version for UK residents under the age of 18.
It can be Cash or Stocks and Shares.
The capital legally belongs to the child and becomes available at the age of 18.
Key operating rules
ISAs follow the British fiscal year from 6 April to 5 April.
The overall contribution limit is £20,000 per year, which can be distributed among the various types, subject to the specific limits of the LISA.
Individual Savings Plans (PIR): investing in Italy with tax advantages
Individual Savings Plans (PIR) represent one of the most interesting instruments introduced in Italy to combine long-term investment and support for the real economy, with a particular focus on small and medium-sized enterprises (SMEs), the real engine of the national productive fabric.
Thanks to a highly favourable tax regime, PIRs are aimed at those who wish to grow their capital over time, participating in the development of Italian companies in a simple and structured way.
What is an Individual Savings Plan
A PIR is an investment plan dedicated to natural persons, allowing them to invest in financial instruments linked mainly to Italian and European companies with a permanent establishment in Italy.
The distinctive feature of the PIR is the possibility of accessing important tax benefits, provided the investment is maintained for at least five years. This time constraint favours a long-term view, reducing volatility and encouraging a more conscious management of savings.
Who can subscribe to a RIP
RIPs are reserved exclusively for:
- individuals resident for tax purposes in Italy
- one PIR for each investor
They cannot therefore be subscribed by companies, entities or persons not resident for tax purposes in Italy. This approach reinforces the original objective of the instrument: to channel private savings into the domestic productive economy.
Tax advantages: a concrete incentive for the long term
The main strength of PIRs is their favourable tax treatment. If the plan is maintained for at least five years, the investor benefits from:
- full tax exemption on capital gains and dividends
- exemption from inheritance tax
These are significant benefits, which can significantly affect the final return on investment. In the case of early disinvestment, however, the tax benefits are lost and taxes due must be paid.
How capital is invested
The resources invested in a PIR are allocated to financial instruments linked to the Italian economy, including:
- shares and bonds of Italian companies
- financial instruments of European companies with a permanent establishment in Italy
At least 70% of the portfolio must be invested in these companies, with a significant share going to SMEs not included in the main market indices. This makes RIPs a strategic instrument to support the growth of dynamic and innovative companies.
The management of the plan is entrusted to qualified professionals, allowing the investor to access complex markets without having to make operational choices directly.
Investment limits
For ordinary RIPs established as of 1 January 2022, the regulations provide:
- a maximum of EUR 40,000 per year
- a maximum of EUR 200,000 in total over five years
RIPs opened in earlier years may be subject to lower limits, depending on the regulations in force at the time of subscription.
ISAs and RIPs compared: different logics, same objective
ISA and PIR respond to different regulatory frameworks, but share a common strategic purpose: to make capital growth more efficient through tax relief.
ISAs offer maximum flexibility, access to capital and total tax neutrality over time.
PIRs favour a fixed horizon in exchange for targeted tax benefits and support for the domestic economy.
Properly placed within broader financial planning, they can be complementary instruments, each in its own fiscal context.
Final considerations
The absence of taxation on interest, income and capital gains is one of the most fundamental factors in long-term wealth building. ISA and PIR demonstrate how different tax policies can converge towards the same goal: increasing the net return for the disciplined investor.
The choice of the most suitable instrument depends on tax residence, objectives, time horizon and risk profile. In an international context, the support of a qualified advisor becomes a key element to avoid inefficiencies and take full advantage of available opportunities.
Investments involve risk and value can go up or down. Conscious planning remains the real differentiating factor in the long run.
