A stocks and shares ISA is effectively a ’tax wrapper’ that can be put around a wide range of different investment products. Any investment growth or interest earned within a Stocks and shares ISA is tax-free.
Lots of different types of investment can be held in an ISA, including:
- unit trusts
- investment trusts
- exchange-traded funds
- individual stocks and shares
- corporate and government bonds
- OEICs (Open Ended Investment Companies).
You’ll often find that stocks and shares ISAs are sold and marketed as products in their own right.
You can pay a total of £20,000 a year into an ISA in the 2023-24 tax year.
- You can divide your ISA allowance across the four different types of ISAs: cash, stocks and shares, innovative finance or lifetime. Although the maximum you can put into a lifetime ISA is £4,000 each tax year.
- You can’t put money into the same type of ISA in the same tax year, for example, two stocks and shares ISAs – you’d need to wait until the next tax year to put money into the second stocks and shares ISA.
- Your annual ISA allowance expires at the end of the tax year (5 April) and any unused allowance will be lost. It can’t be rolled over to the following year.
- You can make a lump sum investment and/or regular or ad hoc contributions throughout the tax year.
- Any increase in value of the investments in your stocks and shares ISA is free of Capital Gains Tax.
- Most income from your stocks and shares ISA is tax-free.
- You can only pay into one stocks and shares ISA in each tax year, but you can open a new ISA with a different provider each year if you want to. You don’t have to use the same provider for your cash ISA if you have one.
- It’s worth shopping around to make sure you find an ISA that suits you. Compare any charges for the ISA wrapper and the range of investments you can put inside.
ISA rules introduced in April 2015 mean that if your husband, wife or civil partner dies you can inherit their ISA. You will receive an additional ISA allowance equal to the value of the deceased’s ISA savings at the time of death.
If a fund manager goes bust and owes you money – and the manager is covered by the Financial Services Compensation Scheme - you can claim compensation of up to £85,000 per person, per institution.
But you won’t get any compensation just because the value of your investments falls.
You can buy an ISA:
- directly from an ISA provider
- directly through a fund manager
- directly from discount brokers, fund supermarkets or a bank
- from a regulated financial adviser or financial planner
- through an online share account or stockbroker.
Charges might vary for the same product depending on where you buy it, so check and see where it’s cheapest.
If you’re not sure what kind of investments would suit your personal goals and needs, talk to a regulated financial adviser.
Investments that pay interest (ie government and corporate bonds), or rental income (such as some property funds) provide 100% tax-free income if held within an ISA and therefore offer tax benefits for everyone.
All individuals are eligible for a £1,000 tax-free Dividend Allowance. The dividend allowance is in addition to your personal allowance, which is the amount you can earn each tax year before you have to start paying tax. From 6 April 6 2024, it is being halved again, going down to £500.
Dividends received by pension funds or received on shares within an ISA are tax free and won’t impact your dividend allowance.
Also, any profit you make when selling investments in your stocks and shares ISA is free of Capital Gains Tax.
Any losses made on your investments in your stocks and shares ISAs can’t be used to offset capital gains on your other investments.
If you’re unhappy with the service you receive or want to make a complaint, start off by contacting your provider or your advisor.
Most fund managers and ISA managers are regulated by the Financial Conduct AuthorityThis means that if your complaint is not resolved to your satisfaction, you can then take it to the Financial Ombudsman Service
FAQs
Investing in a stocks and shares ISA could be a good choice for you if: you're planning for your future and won't need to access your money within the next few years. you're trying to make the most of your money over the longer term.
What ISA stocks and shares ISA account? ›
A Stocks and Shares ISA is a tax-efficient way to invest your money for the future. As long as you're willing to invest for the longer-term and a level of risk that feels right for you. This is because investments do rise and fall in value, and longer periods (i.e. 5+ years) allow them to weather market changes.
What is the best performing stock and share ISA? ›
Managed Stocks and Shares ISA performance – 5 year comparison table
| 5 year annualised return | 2021 return |
|---|
| Nutmeg (Portfolio 7) | 6.14% | 12.70% |
| Vanguard LifeStrategy 60% Equity | 5.96% | 9.93% |
| Wealthify (Ambitious Portfolio) | 5.51% | 9.70% |
| Moneyfarm (risk level 5)* | 5.49% | 11.30% |
9 more rowsApr 23, 2024
Stocks and shares ISAs carry a higher risk as well as a higher potential for rewards, depending on where the money is invested. It's important to work with an independent financial advisor if you're investing in a stocks and shares ISA because there may be a possibility of capital loss.
Can I put $20,000 in an ISA every year? ›
Putting money into an ISA
Every tax year you can save up to £20,000 in one account or split the allowance across multiple accounts. The tax year runs from 6 April to 5 April. You can only pay into one Lifetime ISA in a tax year. The maximum you can pay in is £4,000.
Why is my stocks and shares ISA doing so badly? ›
A fund might be a dud, a fund manager might leave, or you might not be willing to take as many risks as you once did. If you don't review your portfolio regularly, you could end up with a stocks & shares ISA losing money. Don't panic. Investments can go down as well as up.
Are stocks and shares ISAs tax-free? ›
A stocks and shares ISA is effectively a 'tax wrapper' that can be put around a wide range of different investment products. Any investment growth or interest earned within a Stocks and shares ISA is tax-free.
What happens if I take money out of my stocks and shares in ISA? ›
Although Stocks and Shares ISAs are designed for long-term investing, there are times you might want to withdraw money from your ISA. You can do this at any time. There's no charge, though there may be charges for selling some investments, depending on which you hold.
What bank has the best stocks and shares in ISA? ›
Our top five ready-made stocks and shares Isas
- InvestEngine. ...
- Plum. ...
- AJ Bell Dodl. ...
- AJ Bell Stocks and Shares Isa. ...
- Interactive Investor. ...
- Fidelity Personal Investing. ...
- Vanguard Isa. ...
- IG Stocks & Shares Isa. Best for experienced, high net-worth investors.
You can pay into two ISAs in the same tax year provided they are different types of ISA. It would be fine to pay into both a cash ISA and a Stocks & Shares ISA in one tax year as long as you're below the £20,000 limit. You would not be able to pay into two different ISAs of the same type.
You can vary how much risk you take, depending on what you invest in, and this can also have an impact on your returns. The average rate of return for a Stocks and shares ISA over the past decade is 9.6%, according to Moneyfacts, whereas the average rate of return for a Cash ISA is 1.2%.
Can you make money from stocks and shares ISA? ›
With a stocks and shares ISA, it's possible to choose investments with more growth potential. But remember, the value of stocks and shares can go down as well as up, so you may not get back what you invest. With a cash ISA your money typically sits in a deposit account, which means it's low risk.
Can I put $50,000 in a cash ISA? ›
You can invest up to £20,000 in your ISA each year, whether it's a cash ISA, an innovative finance ISA, or a stocks and shares ISA, and you can watch your money grow within your tax-free wrapper, including any income you build up.
Is Vanguard a stocks and shares ISA? ›
We offer a flexible Stocks and Shares ISA. Which means you can take money out and put it back in again later in the same tax year without it affecting your ISA allowance.
Should I move my stocks and shares ISA to cash? ›
Never withdraw the money from your stocks and shares ISA yourself and pay it into a cash ISA as you risk losing its tax-free status.
Can a stocks and shares ISA lose money? ›
in most cases, your money is not locked in – you can usually take some or all of it out whenever you want, although with a: fixed rate cash ISA you might have to pay a charge or even close your account to pull it out early. stocks and shares ISA you might lose money if your investment's lost value.
Is it still worth putting money in an ISA? ›
Is it worth having an ISA when you may be able to earn interest tax-free with a PSA? Even with PSAs, ISAs are still a good option for many people. There are several benefits to ISAs, including for long-term savings, inheritance, and reducing risk.
ISA stocks and shares ISA better than a general investment account? ›
The main difference between a Dealing account and a Stocks and shares ISA involves tax. You'll normally be able to choose from the same investment range in a Stocks and shares ISA vs a share dealing account. But when you hold your investments in a Stocks and shares ISA, they're protected from tax.
