# Investment trusts explained

> Investing & ISAs · Last updated 4 July 2026

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## Quick answer

Investment trusts are UK closed-ended companies listed on the stock exchange — they can use gearing and hold illiquid assets, often trading at a discount or premium to net asset value.

Unlike open-ended funds, investment trusts have a fixed share count and a board of directors. They have existed for over 150 years and remain popular for global equity, infrastructure and private assets. This guide explains structure, pricing and tax.

## Key facts

- Investment trusts are public companies whose shares trade on the London Stock Exchange
- Share price can differ from net asset value — often at a discount, sometimes at a premium
- Trusts may borrow (gear) to invest more, amplifying gains and losses
- Dividends from UK investment trusts inside ISAs are tax-free; outside ISAs dividend tax rules apply

## Structure and pricing

When you buy an investment trust share, you buy from another investor on the stock exchange — the trust does not create or cancel units daily like an OEIC. This closed-end structure is why the share price can diverge from net asset value.

If demand is weak, shares may trade below NAV (a discount). A 10% discount means you buy £1 of assets for 90p, but discounts can widen further.

## Gearing and risk

Boards can borrow to increase exposure. Gearing boosts returns in rising markets but magnifies falls — check the gearing ratio in factsheets.

Trusts can invest in illiquid assets like private equity or property that open-ended funds struggle to hold, but liquidity risk remains for shareholders. You rely on other investors wanting to buy your shares when you need to sell.

## Tax and wrappers

Hold investment trust shares in a stocks and shares ISA to shelter dividends and capital gains. Outside ISAs, report gains above the £3,000 CGT annual exempt amount.

Some trusts publish tax data on interest and dividend splits to help higher-rate taxpayers report accurately. Check the trust's website each year for the tax report before completing your Self Assessment.

## Frequently asked questions

### Are investment trusts safer than funds?

Not necessarily. Gearing and discounts add risks. Diversification and trust quality matter more than the legal structure.

### How do I buy them?

Through share-dealing platforms and some ISAs. You pay share dealing spreads and platform fees like any listed stock.

### What is a dividend hero?

Industry nickname for trusts with long records of rising dividends — useful for research, not a guarantee of future payouts.

## Primary source

https://www.moneyhelper.org.uk/en/savings/investing

## Related

- [Index vs active funds](https://moneyguide.org.uk/investing/index-vs-active-funds/)
- [ETFs explained](https://moneyguide.org.uk/investing/etfs-explained/)

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Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.