Alternative investments are any assets outside the mainstream categories of equities, bonds, and cash. They range from the relatively conventional — gilts issued by the UK government, or listed REITs on the London Stock Exchange — to the highly speculative, such as cryptocurrency and early-stage startup funding through EIS.
This hub covers each major alternative investment type available to UK retail investors, including the tax treatment, risks, and who each is most suitable for.
Who Should Consider Alternative Investments?
Alternative investments are generally appropriate only as a complement to a core portfolio, not a replacement for it. The FCA and most financial advisers recommend building an emergency fund, then a diversified core portfolio of low-cost index funds, before allocating to alternatives.
That said, some alternatives — particularly gilts and REITs — sit closer to mainstream investing and are widely held in balanced portfolios.
Overview of Alternative Investment Types
| Asset | Risk level | Tax wrapper eligible | FSCS protected |
|---|---|---|---|
| UK gilts and bonds | Low–medium | ISA, SIPP | No (government-backed) |
| REITs | Medium | ISA, SIPP | No |
| Investment trusts | Medium | ISA, SIPP | No |
| Gold | Medium–high | Some ISAs | No |
| Peer-to-peer lending | High | IFISA | No |
| Cryptocurrency | Very high | No mainstream wrapper | No |
| VCTs | Very high | No | No |
| EIS / SEIS | Very high | No | No |
Gilts and Government Bonds
Gilts are UK government bonds issued by HM Treasury. When you buy a gilt, you are lending money to the government in exchange for regular interest payments (the “coupon”) and the return of your capital at maturity. They are among the lowest-risk investments available, though their market price fluctuates with interest rates.
Worked example: A 10-year gilt with a face value of £1,000 and a 4.5% coupon pays £45 per year in interest. If you hold it to maturity, you receive £1,000 back regardless of how the price moved in the interim.
REITs — Real Estate Investment Trusts
A REIT is a company that owns and operates income-producing property. UK-listed REITs must distribute at least 90% of their qualifying profits as dividends, making them a popular choice for income-seeking investors. They can be held in an ISA or SIPP to shelter income from tax.
Cryptocurrency
Cryptocurrency — including Bitcoin and Ethereum — is not regulated by the FCA as an investment product. Crypto assets held outside an ISA are subject to capital gains tax (CGT) on disposal. HMRC treats crypto as a capital asset, not currency. The annual CGT exempt amount for 2026/27 is £3,000.
Peer-to-Peer Lending
P2P lending platforms match borrowers with individual lenders. Returns can be higher than savings accounts, but capital is at risk and is not FSCS protected. Some P2P lending can be held in an Innovative Finance ISA (IFISA) to shelter interest from income tax.
VCTs, EIS and SEIS
These government-backed venture capital schemes offer substantial tax reliefs in exchange for investing in early-stage UK companies:
- SEIS: 50% income tax relief, CGT exemption, loss relief — for seed-stage companies
- EIS: 30% income tax relief, CGT deferral, loss relief — for smaller growth companies
- VCT: 30% income tax relief, tax-free dividends — for diversified portfolios of small companies
All three carry high failure risk and are illiquid. They are not suitable for most retail investors.
Articles in This Cluster
| Article | What it covers |
|---|---|
| Gilts and Bonds Guide UK | How gilts and corporate bonds work, yields, tax treatment |
| REITs Guide UK | What REITs are, how to invest, tax wrapper options |
| Investment Trusts Guide UK | How investment trusts differ from funds, discounts, income |
| Gold Investing Guide UK | Physical gold, gold ETFs, storage, CGT |
| Peer-to-Peer Lending Guide UK | How P2P works, IFISA, platform risk, FSCS gap |
| Cryptocurrency Beginners Guide UK | How to buy crypto in the UK, tax, FCA registration, risks |
| Crypto Inheritance Guide | What happens to crypto when you die, how to pass it on |
| Venture Capital Trusts (VCT) Guide | VCT tax reliefs, risks, how to invest |
| SEIS vs EIS Comparison | Which venture capital scheme is right for you |