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Markets & Insights

7 things you should know about a stocks & shares ISA

Written by Tom Lamb on Jul 12th, 2022 Time to read: 4 minutes

Whether you are new to investing or simply looking to open a new ISA, here are the top 7 things you should know about Stocks and Shares ISAs

  1. How a Stocks & Shares ISA works

A Stocks & Shares ISA is a tax-efficient account that allows you to invest up to £20,000 each tax year (2022/23 tax year allowance). This type of investment account is usually free to withdraw from and you can access your money at any time if needed. You should be aware however that stocks and shares ISAs are intended to be kept for a minimum of 5 years due to the potential for the fund value to go down as well as up. Holding the ISA for a longer period of time provides the chance to recover from any short term losses.

To open a stocks and shares ISA you must be:

  • Aged 18 or over
  • A UK resident for tax purposes
  • Comfortable that the value of investments can go down as well as up as your capital is at risk when investing.
  1. You can invest without paying capital gains tax 

You won’t pay Income Tax or Capital Gains Tax on the money inside your ISA, no matter how much it grows. This can be particularly useful if you’ve made other capital gains elsewhere in the year. As well as this, any profit you make when selling investments in your Stocks & Shares ISA is free of Capital Gains Tax. However, any losses made on your investments in your Stocks & Shares ISAs can’t be used to offset capital gains on your other investments.

  1. Freedom to choose what you invest in

With a Stocks & Shares ISA, you have the freedom to choose where you invest in from a wide variety of investment options. Everyone’s long-term goals are unique which is why it’s essential to invest in line with your own attitude to risk and considering your needs, objectives, and preferences.

With a Stocks & Shares ISA, you can invest in:

  • Individual stocks and shares
  • Corporate and government bonds
  • Investment trusts
  • Authorised funds
  • Exchange-traded funds
  • OEICs (Open Ended Investment Companies).
  1. Stocks & Shares ISAs can be transferred

You are able to transfer your Stocks & Shares ISA between different providers. You can transfer in full or in part, although this may depend on the provider. It’s important to note that any transferred Stocks & Shares ISA keeps all the same tax advantages.

  1. You can invest in your ISA regularly

To open an ISA with us the minimum initial lump sum required is £1. Once you have opened your ISA you may then start contributing as and when you choose and investing in your chosen Portfolio. With most ISAs you are able to set up monthly investment direct debits from as little as £25 (this may differ depending on the provider). You cannot invest more than the annual allowance each tax year (£20,000 for tax year 2022/23)

  1. Stocks & Shares ISAs can provide the potential for greater growth compared to a Cash ISA

The returns you get from a Stocks & Shares ISA aren’t limited by the provider’s interest rate. Cash ISA interest rates are often below the rate of inflation, meaning money saved in them is likely losing its buying power. By keeping your money in a Stocks & Shares ISA there’s potential for your investments to grow over time, especially over a longer period of time of 5 years or more.  However, with a stocks and shares ISA there is a risk that you could lose money, unlike a Cash ISA. There is nothing stopping you from opening both a Stocks & Shares ISA and a Cash ISA (as long as you don’t go over your combined £20,00 annual ISA allowance for tax year 2022/23).

If you would like to know more about the difference between  a stocks and shares ISA and a Cash ISA you can watch our discussion during our ‘Do More With Your Money’ video series.

  1. ISAs are easily manageable

As mentioned, ISAs provide the freedom to invest in what you want depending on your attitude to risk, personal goals, and circumstances. They are also easy to manage with the right investment technology. Having your investments on the right technology platform means you can also understand how your investments are performing in real-time and why.

There are many things to consider when it comes to investing, if you’re new to ISAs or investing, it’s worth reading our guide to choosing the right ISA for more information. If you have any questions, please feel free to contact us and we’ll be happy to help.

With investing, your capital is at risk. Investments can fluctuate in value, and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. The information contained in this publication does not constitute a personal recommendation and the investments referred to may not be suitable for all investors.

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With investing your capital is at risk. Investments can fluctuate in value, and you could get back less than you invest.

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