SIPP and ISA Wrappers for Private Market Exposure

UK retail investors are increasingly looking beyond public stock markets to build wealth, turning their attention towards private markets. This category includes a broad range of assets, from venture capital and private equity to infrastructure and direct lending. Historically the preserve of institutional funds and the very wealthy, a combination of regulatory change and product innovation is slowly opening these markets to a wider audience. The key to accessing them efficiently lies in understanding the role of the UK's primary tax wrappers: Self-Invested Personal Pensions (SIPPs) and Individual Savings Accounts (ISAs).

Using these wrappers effectively can significantly impact net returns by sheltering investment growth and income from capital gains and income tax. However, the rules governing which private assets can be held within a SIPP or an ISA are complex and vary considerably between the two. This article provides a detailed overview for UK investors considering how to incorporate private market assets into their long-term savings strategy in 2026, focusing on the permitted investments, the platforms that enable access, and the associated tax implications.

We will examine the distinct roles of the Stocks & Shares ISA, the Innovative Finance ISA (IFISA), and the far more flexible SIPP. We will also clarify the position of specialist tax-advantaged schemes like the Enterprise Investment Scheme (EIS) which operate outside these wrappers. The objective is to provide a clear, practical framework for making informed decisions.

At its core, a tax wrapper is a legal structure that allows investments held within it to grow free of certain taxes. For UK investors, the SIPP and ISA are the foundational tools for long-term wealth accumulation. An ISA permits up to £20,000 of subscriptions per tax year (2025/2026), with all subsequent income and capital gains being entirely tax-free. A SIPP, on the other hand, is designed for retirement savings and offers tax relief on contributions, with investments also growing free of UK income and capital gains tax.

The abolition of the Lifetime Allowance from April 2024 has been replaced by two new controls: the Lump Sum Allowance (LSA), capped at £268,275, and the Lump Sum and Death Benefit Allowance (LSDBA), set at £1,073,100. These govern the total amount of tax-free cash that can be withdrawn from a pension. Understanding these allowances is crucial when planning long-term withdrawals from a SIPP that contains illiquid private market assets.

The central question for an investor interested in private markets is not whether to use a wrapper, but which one is suitable for a given asset. The answer depends entirely on Her Majesty's Revenue and Customs (HMRC) rules, which define the types of assets that qualify for the tax benefits of ISAs and SIPPs respectively. Placing a non-permitted asset into a wrapper can negate the tax advantages and, in the case of a SIPP, lead to significant penalties.

The tax efficiency of a SIPP is contingent on it holding only 'permitted investments' as defined by HMRC. While the list of permitted investments is long, the rules are designed to prevent tax avoidance and ensure pensions are used for their intended purpose of providing retirement income. Permitted investments include standard assets like stocks listed on a recognised exchange, government bonds, unit trusts, and investment trusts.

Crucially, this also includes many unlisted shares, provided they are genuine commercial enterprises. However, the rules become more complex when a SIPP invests in assets that could confer a personal benefit to the member. The most notable example is residential property. A SIPP is strictly forbidden from holding residential property, and doing so incurs a series of tax charges, including an unauthorised payment charge on the member of at least 40%, and a scheme sanction charge on the pension scheme itself.

If a SIPP invests in what HMRC deems 'taxable property' — which includes personal chattels like fine wine, art, or classic cars, as well as residential property — punitive taxes apply. This framework is why access to direct unlisted assets, while possible, is often managed through specialist SIPP providers who conduct thorough due diligence to ensure compliance with these intricate rules.

For most retail investors, the Stocks & Shares ISA offers the most straightforward route into certain types of private market assets. The key is that the investment must be 'readily realisable', which generally means it must be listed on a recognised stock exchange, such as the London Stock Exchange. This opens up a world of publicly-listed investment trusts that specialise in holding unlisted assets.

These vehicles provide exposure to private markets with the liquidity of a regular share. Examples of such 'listed private equity' trusts include 3i Group plc, HgCapital Trust plc, and Pantheon International Plc. These trusts invest in portfolios of private companies but their own shares are traded daily on the open market, making them fully compliant for ISA inclusion.

Beyond private equity, ISAs can also hold listed trusts focused on other alternative assets. Infrastructure is a popular category, with trusts like HICL Infrastructure PLC and International Public Partnerships Limited investing in long-term projects such as schools, hospitals, and transport networks. Similarly, Real Estate Investment Trusts (REITs) like SEGRO plc or British Land offer exposure to commercial property portfolios within an ISA. For investors seeking a simple, liquid entry point to alternatives, listed trusts are the primary option.

The Innovative Finance ISA (IFISA) was introduced in 2016 to allow investors to hold peer-to-peer (P2P) loans and certain other debt-based securities within a tax-free wrapper. Unlike a Stocks & Shares ISA, the IFISA is designed specifically for these less liquid, direct lending activities. It allows investors to earn interest from loans made to individuals, small businesses, or property developers without paying income tax on the returns.

Assets eligible for the IFISA are specific debt-based crowdfunding securities and P2P loans, which must be managed by an Financial Conduct Authority (FCA) authorised platform. It is important to recognise that the IFISA cannot hold equity-based crowdfunding investments, nor can it hold the listed trusts suitable for a Stocks & Shares ISA. The annual £20,000 ISA allowance can be split between different types of ISA, for example a Stocks & Shares ISA and an IFISA, in the same tax year.

While the tax benefits are clear, the risks are pronounced. The failure of several high-profile P2P platforms in recent years underscores the importance of due diligence. Unlike bank deposits, the capital is not protected by the Financial Services Compensation Scheme (FSCS). The liquidity of these investments is also highly constrained; while some platforms offer secondary markets, you should be prepared to hold the investment until the underlying loan is repaid. As of early 2026, the market has consolidated significantly, with a smaller number of more established platforms remaining.

A SIPP offers a far greater range of investment possibilities compared to an ISA. Beyond the listed investment trusts available in an ISA, a SIPP can, in principle, hold a wide variety of unlisted and unconventional assets. This makes it the most powerful tool for sophisticated investors wanting to build a diversified portfolio that includes direct private market exposure.

One of the most significant recent developments is the introduction of the Long-Term Asset Fund (LTAF). This FCA-regulated fund structure was specifically designed to allow defined contribution pension schemes, including SIPPs, to invest in illiquid assets like private equity and infrastructure. As of 2026, several asset managers, including Schroders and BlackRock, have launched LTAFs, and a growing number of SIPP platforms are starting to make them available to their clients. LTAFs offer a regulated and diversified route into private assets without the complexity of direct investment.

Furthermore, a SIPP can directly hold unlisted shares in a private limited company, provided it is a genuine trading business and not an investment vehicle holding prohibited assets like residential property. This is a complex area requiring specialist advice and is typically only facilitated by a 'full SIPP' provider. The SIPP can also hold commercial property, allowing business owners to acquire their premises via their pension, a popular and tax-efficient strategy. However, this route is subject to strict rules on borrowing, leasing arrangements, and valuations to avoid tax penalties.

The theoretical ability of a SIPP to hold an asset is different from the practical ability to do so through a specific platform. The major retail investment platforms, such as Hargreaves Lansdown, AJ Bell, and Interactive Investor, generally offer a wide range of listed investments including the investment trusts and REITs discussed earlier. However, their offering of more esoteric private assets is often limited.

While some of these platforms have begun to offer access to a curated list of LTAFs, they will typically not facilitate direct investment in unlisted shares or commercial property due to the administrative complexity and compliance risk. An investor wishing to hold these types of assets must therefore look to specialist SIPP administrators, often referred to as 'full SIPP' providers.

Companies like Curtis Banks, Xafinity SIPP Services (part of XPS Group), and James Hay are examples of firms that specialise in administering SIPPs with non-standard assets. They have the expertise to conduct the necessary due diligence on an unquoted company or a commercial property purchase, ensuring the investment complies with HMRC's permitted investment rules. The fees for these specialist SIPPs are higher than for mainstream platforms, reflecting the manual work required, but they are the essential gateway for investors serious about direct private market allocation within their pension.

It is a common misconception that investments made under the Enterprise Investment Scheme (EIS) and the smaller Seed Enterprise Investment Scheme (SEIS) can be placed inside an ISA or SIPP. This is incorrect. These are direct investments in qualifying early-stage companies, and their significant tax advantages are designed to apply directly to the investor, entirely separate from the ISA and SIPP frameworks.

Under the EIS, an investor can receive 30% income tax relief on investments up to £1 million per year (with a higher limit for knowledge-intensive companies). Any capital gain is exempt from Capital Gains Tax (CGT) if the shares are held for at least three years. Furthermore, EIS investments offer loss relief, allowing an investor to offset any losses against their income tax bill. SEIS offers even more generous reliefs, with 50% income tax relief on investments up to £200,000 per year, reflecting the higher risk of investing in seed-stage businesses.

Because these tax reliefs are so substantial and are claimed directly via an individual's self-assessment tax return, the investments themselves do not need the additional shelter of an ISA or SIPP. In fact, attempting to place them within one would be incompatible with the schemes' rules. Therefore, investors should view EIS and SEIS as a separate allocation for high-risk, venture-style investments that comes with its own powerful, standalone tax structuring.

In 2026, the UK retail investor has more choice than ever for accessing private markets. The route to success is a methodical approach, matching the investment type to the correct tax wrapper and execution venue. For liquid, listed exposure to private equity, infrastructure or property, the Stocks & Shares ISA is an excellent, simple tool using investment trusts. For those comfortable with the credit risk of direct lending, the IFISA offers a way to receive interest tax-free.

For the broadest access, particularly to the new generation of LTAFs or for direct holdings like unlisted shares and commercial property, a SIPP is the superior and often only choice. However, this path requires careful platform selection, with specialist providers necessary for anything beyond regulated collective investment schemes. Finally, schemes like EIS and SEIS remain distinct, offering powerful tax reliefs outside of the conventional wrapper ecosystem for high-risk venture capital investments.

By understanding the specific rules and limitations of each wrapper, investors can build a more diversified and tax-efficient long-term portfolio that thoughtfully incorporates the return potential of private markets.