Guide to stocks and shares ISAs

The information in this guide was last updated on 6 April 2019

A stocks and shares ISA is a tax efficient way to invest.

You can put your ISA allowance into a range of investments such as cash, government or corporate bonds, property or stocks and shares. Or you can choose a fund which is a mix of different investment types.

See more about these investment types

You get tax efficiencies on the gains you make from the money you invest in your ISA.

How much can I invest?

For the 2019/2020 tax year, the total ISA allowance is £20,000.

You can choose to split this allowance between cash and stocks and shares ISAs.

What are the tax efficiencies?

Stocks and shares ISAs:

  • No personal liability to capital gains tax on any growth.
  • No tax to pay on any dividend distributions. No further tax on interest distributions.
  • We reclaim the 20% tax that was deducted on interest distributions for you.

All of the above information is based upon our current understanding of HMRC tax rules and is subject to change. For further information, please refer to gov.uk.

How do I get a stocks and shares ISA?

Your chosen provider may offer several ways to open your account including online or through an adviser.

Basically, you need to decide which manager you'd like to have your stocks and shares ISA with, then you need to decide what sort of investments to put into it.

Transferring ISAs

It's important to know that if you withdraw money from an ISA, you'll lose the tax benefits on that money.

But, you don't need to keep the money in your ISA with the same manager. You can transfer ISAs to or away from different managers. The rules say that you can transfer some or all of the contents in ISAs from previous tax years, but only the total amount you've got in the current year's ISA.

Transfers made from one ISA manager to another ISA manager in a tax year will not impact on your annual ISA allowance for that tax year. So, you could open a stocks and shares ISA to put your 2019/2020 allowance into, and open a cash ISA to transfer previous years ISA allowances into. Or you could open an ISA and put your new allowance into it, and transfer old allowances into it too.

Check to make sure that the ISA you open accepts transfers.

Important information

The favourable tax treatment for ISAs depends on your individual circumstances and may vary in the future.

Please remember that the value of your investments can go down as well as up so you may get back less than you originally invested.

Investments should be considered as a long term option of 6 years or more.

You need to be aged 18 or over and be resident in the UK to hold a stocks and shares ISA.

When should I consider investing in a stocks and shares ISA

Compared to keeping money in the bank, investing can give you potentially greater rewards, however it also comes with additional risk and there's a chance your investments will lose money.

Investing might be right for you if:

  • You've paid off your debts
  • You have access to savings in a bank or building society to cover unexpected emergencies
  • You're willing to invest the money for the long term of 6 years or more
  • You're comfortable with the risks that come with investing.