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A Stocks & Shares ISA is a tax-efficient investment account where you can invest up to £20,000 a year in UK and international shares, funds, investment trusts, bonds and ETFs. When you invest within a Stocks & Shares ISA, all the capital gains and income generated from your investments are completely tax-free.

Best Stocks and Shares ISA Accounts 2022

We have ranked, compared and reviewed some of the best stocks and shares ISA accounts in the UK that are regulated by the FCA.

Our picks for the best stocks and share ISA accounts are based on:

  • over 7,000 votes in our annual awards
  • our own experiences testing the ISA accounts with real money
  • an in-depth comparison of the features that make them stand out compared to alternative stocks and shares ISAs.
  • interviews with the ISA account provider CEOs and senior management

All investing carries risk. This article contains affiliate links which may earn us some form of income if you go on to open an account. This does not affect our editorial bias, rankings or comparison.

Interactive Investor

Interactive Investor: Best stocks and shares ISA account 2022

Interactive Investor is a low-cost investment provider that provides access to over 40,000 shares and 3,000 funds, as well as investment trusts, ETFs and bonds. Interactive Investor won the 2022 Good Money Guide award for best stocks and shares ISA account.

Pros:

  • Choose your own investments
  • £1 minimum deposit
  • Fixed account fee of £9.99 per month*

Cons:

  • Limited managed options
  • Not great for very small accounts
*Dealing commissions are a free trade every month, then UK Shares and Funds, US Shares charged £7.99 or upgrade to a £19.99 “Super Investor” account 2 free monthly trades and deal for £3.99. Regular investing is free.

Hargreaves Lansdown

Hargreaves Lansdown: Best ISA for customer service and research

Hargreaves Lansdown’s Stocks & Shares ISA offers access to a vast range of investments. Investors have access to domestic and international equities, over 3,000 funds, bonds, and more. Another advantage is that the platform offers plenty of research and investment tools to help you make investment decisions.

Pros:

  • Excellent research and data
  • Low share costs
  • Wide range of investments
  • Account fee from 0.45%*

Cons:

  • Can be expensive for big fund portfolios

*Share account fees are capped at £45 per year. Funds are charged at 0.45% for the first £250,000. There is no charge for buying funds, but shares are charged at £11.95 per deal or £5.95 if you do over 20 deals per month.

AJ Bell Youinvest

AJ Bell Youinvest: Cheapest self-select investment ISA

AJ Bell Youinvest is an award-winning, low-cost online investing platform for the UK DIY investor. Its aim is to make the process of investing as easy as possible in invest stocks in more than 20 markets, over 2,000 funds, ETFs, and bonds.

Pros:

  • Low cost 0.25%* DIY investing account fee
  • Well established platform
  • Lots of other account options

Cons:

  • High minimum deposit of £500
  • Limited managed options
*Share account fees are capped at £3.50 a month. Dealing costs are £1.50 for funds and £9.95 for shares but drop to £4.95 where there were 10 or more online share deals in the previous month

Nutmeg

Nutmeg: Best for beginners who want simple investment ISA

Nutmeg offers off-the-shelf portfolios across its ISA range to suit four different investment styles. Investors can dial the risk up and down within the investment styles to build a tailored portfolio which matches their attitude to risk.

Pros:

  • Managed account which reduces decisions
  • Simple premade portfolios
  • Owned by JP Morgan

Cons:

  • £500 minimum investment
  • 0.75%* account fee relatively high for a robo-advisor
*Nutmeg account fees drop to 0.35% for balances over £100k. There is an addition charged by the investment fund managers of around 0.2% and the market spread on buying and selling portfolios is on average 0.07%

Moneyfarm

Moneyfarm: Best for simple risk-based investment ISAs

Moneyfarm invests in ETFs to keep the costs low, so you aren’t paying for active managers. Instead, you are benefiting from tracking a series of diversified indices that are regularly rebalanced. This should mean you get to keep most of your returns rather than paying hefty fees to fund managers.

Pros:

  • Portfolios based on ETFs
  • Wide range of plans
  • Simple to use

Cons:

  • £500 minimum deposit:
  • 0.75%* account fee relatively high for a digital wealth manager
*Moneyfarm investing account fees are scaled between 0.75% for accounts between £500 and £50,000, then above £100k are 0.45% to 0.35%. Average investment fund fees are 0.2% and the average market spread when buying and selling is 0.10%
Interactive Brokers

Interactive Brokers: Best ISA for experienced investors

As well as investing in higher-risk derivative products (where IBKR excels) such as CFDs, futures and options, Interactive Brokers also offers its clients a stocks and shares ISA to shelter their tax-free allowance for longer-term investing.

Pros:

  • Huge range of UK and international investments
  • Excellent range of platforms
  • Very low cost ISA account

Cons:

  • US based
  • Desktop platform too complicated for beginners
*Minimum dealing commisssions are £1 in the UK or 0.05% of the deal size.

IG

IG: Best ISA for US stocks & Smart Portfolios

IG offer a very cheap way to include US stocks directly in your investment ISA. But, if you prefer not to trade in individual equities you can take advantage of and invest in a range of Smart Portfolios that are selected and managed by BlackRock on IGs behalf.

Pros:

  • DIY and managed ISA options
  • Wide range of markets
  • Simple to use

Cons:

  • More suited to derivatives traders
*There is zero commission on US share trades and just £3 on UK share trades when you trade three or more times a month. Standard dealing fees are £8 for UK and £10 for us shares. Smarrt Portfolio fees are 0.5% – capped at £250 per year. Fund managements charges are 0.13% and transaction costs are 0.09%.

Weathify

Wealthify: Invest from just £1

Wealthify, part of the Aviva Group, lets you invest in either an original portfolio of investments from the UK and overseas or choose an ethical investment plan made from a blend of environmentally and socially responsible investments.

Pros:

  • Managed ISA
  • £1 minimum deposit
  • 0.6% account fee*

Cons:

  • Cannot buy individual stocks and shares

*There are also investment costs of on average 0.16% for original plans and 0.7% for ethical plans. Capital at risk.

Bestinvest

Bestinvest: Best ISA for investment advice and low costs

Bestinvest has combined low-cost online investing and share dealing with personalised expert advice to help clients choose the right investments for their portfolio. A good choice for large long-term investors.

Pros:

  • DIY and managed account options
  • Low account fee of 0.2%*
  • Low minimum deposit of £1

Cons:

  • No international shares
  • No app

*0.2% account fee is for holding ready-made portfolios. above £500,000 it reduces to 0.1%. For other investments the account fee is 0.4% up to £250k. Dealing commissions £4.95 per online share trade, fund dealing is free. 

Saxo Markets: Best ISA for experienced and professional investors

Saxo Markets’ platform lets you invest in more than 11,000 ISA-eligible stocks, ETFs, bonds and commodities, from 60 leading exchanges worldwide.

Pros:

  • Wide market access
  • Excellent platform
  • Low commissions

Cons:

  • High minimum deposit of £500
  • More suited to high risk traders
*Saxo Markets charges a commission based on a percentage of transaction size. They are very competitive though and UK shares trading commission starts at 0.1% (£100 if you buy £100,000 worth of stock) and drops to 0.05% for more active traders.

What is the best stocks and shares ISA in the UK?

We ranked Interactive Investor as the best stocks and shares ISA account in our 2022 awards as they offer low account fees, good research and a wide range of investments.

The best stocks and shares ISA is one that:

  • Allows you to build an investment portfolio that is in line with your financial goals and risk tolerance.
  • Provides access to the assets you wish to invest in whether that’s shares, funds, investment trusts, exchange-traded funds (ETFs), or bonds.
  • Suits your investment style. Some ISA providers cater to do-it-yourself (DIY) investors and provide all the tools investors need to manage their own portfolios. Other providers, however, offer managed accounts and products.
  • Is easy to use and offers a good level of customer service.
  • Enables you to access your money when you need it.
  • Has competitive fees and charges, so you can get the best rate of return.
  • Is regulated by the UK’s financial regulator, the Financial Conduct Authority (FCA), and provides protection under the Financial Services Compensation Scheme (FSCS).

What is the best self-select stocks and shares ISA account?

Interactive Investor was ranked as the best self-select investment ISA in 2022 in our awards particularly if you have if you have a large portfolio and/or trade infrequently, interactive Investor works out as one of the cheapest providers because of it’s fixed investment ISA account fee

What is the best managed stocks and shares ISA?

Nutmeg offer one of the best managed stocks and shares ISA and are now owned by JP Morgan. With Nutmeg you choose a goal, timeframe and amount you’d like to invest and then select your desired risk level. The platform shows what kind of investments it will use to build your portfolio, which is then rebalanced over time. There is a more expensive “fully managed” option, where your investments are proactively managed by experts.

What is the best stocks and shares ISA for beginners?

Wealthify is  on of the best stocks and shares ISAs for beginners as you choose an investment style based on your risk tolerance. The platform then builds your plan and manages it for you. You can start investing with just £1. Wealthify won the 2021 Good Money Guide award for best robo advisor.

Wealthify’s Stocks & Shares ISA offers five different investment options. The options are: Cautious, Tentative, Confident, Ambitious, and Adventurous. All of these strategies are constructed with a mix of low-cost passive investments such as ETFs and funds. Investors also have the option to build an ethical portfolio.

One downside to Wealthify is that, like Nutmeg, there are only a few investment options to choose from. There is not a lot of flexibility and you cannot invest in individual shares and funds.

Wealthify charges an annual fee of 0.60% for managing your investments. Other costs can apply, however, Wealthify aims to keep these as low as possible – around 0.16% for original plans and 0.71% for ethical plans.

Generally speaking, beginner investors require platforms that are easy to use, cost-effective, offer access to products that are well suited to beginners such as ready-made portfolios, and are available to those with small amounts of money to invest.

What is the cheapest stocks and shares ISA platform?

For larger ISA accounts, Interactive Investor is generally one of the cheapest DIY platforms. It offers a flat-fee structure. Its lowest monthly fee is just £9.99.

Determining the cheapest investment ISA platform is not an easy process. That’s because fees tend to vary depending on the size of your account, the assets you invest in, and the number of trades you make.

Two of the cheapest managed ISA platforms are Nutmeg and Moneybox. Nutmeg charges a fee of 0.45% per year on assets up to £100,000 (0.25% above this) and average investment fund costs of 0.19% per year. Moneybox charges an annual fee of 0.45% along with annual fund provider costs of 0.12% to 0.30%. There is also a £1 monthly subscription fee but this is waived for the first three months.

What are the best ethical & ESG investment ISAs?

Ethical investing is an approach that seeks to generate financial gains while also considering environmental, social, and corporate governance (ESG) factors. It’s sometimes called ‘sustainable investing’, ‘socially responsible investing’, or ‘ESG investing.’

Two investment providers that offer ethical ISAs include:

  • Nutmeg. With Nutmeg, you invest ethically by selecting its ‘Socially Responsible’ plan for your ISA. Its Socially Responsible portfolios are tilted towards companies and bond issuers that have high ESG standards.
  • Wealthify. With Wealthify, you can invest ethically by selecting its ‘Ethical’ plan. Wealthify has joined forces with best-in-class ethical fund providers to create a range of five ethical plans that let you invest in organisations committed to having a positive impact on society and the environment.

It’s also possible to build your own ethical ISA through a DIY platform. Providers such as Hargreaves Lansdown, AJ Bell Youinvest, and Interactive Investor all offer a wide range of ethical funds and ETFs that can be purchased for an ISA.

What is the best stocks and shares ISA for dividend investing?

Hargreaves Lansdown is the best stocks and shares ISA for dividend investing as they have the most data, research and tools for buying and comparing high dividend yielding shares.. Hargreaves Lansdown is the largest investment platform in the UK. Through its investment platform, investors can gain access to a vast range of domestic and international dividend-paying stocks as well as a wide range of dividend-paying funds. You can find UK dividend-paying funds by filtering funds for ‘UK Equity Income’ funds.

Dividends are cash payments that some companies pay to their shareholders out of their profits. When you invest in dividend-paying securities within an ISA, all your dividend income is tax-free.

There are two main ways to collect dividends within an ISA. You can either invest in dividend-paying shares or invest in dividend-paying funds. Three top platforms that offer a wide range of dividend-paying shares and funds for ISA investors include:

Further reading:  what is dividend investing and how does it works.

Best stocks and shares ISA for children

We recently awarded Beanstalk App, the best stocks and shares ISA for children for their Junior ISA product. A junior ISA is a tax-efficient investment account that is available to those in the UK aged under 18. With this type of ISA, family and friends can save money on behalf of a child. Junior ISAs currently have an annual allowance of £9,000.

Note: Consider your children’s needs carefully before you open an account for them.

Further reading: Compare the top children’s ISA accounts here.

Best stocks and shares ISA for buying a house

Nutmeg won our award for the best investment ISA to help buy a house with their Lifetime ISA. The main advantage of Nutmeg’s Lifetime ISA is that you can build an investment portfolio very easily. When you sign up to Nutmeg, they ask about your goals and risk appetite. They then use this information to build a portfolio for you. One downside to Nutmeg’s Lifetime ISA is that investment options are quite limited.

A Lifetime ISA is a tax-efficient investment account designed to help people save for retirement or purchase their first home. It is open to those aged 18-39. The annual allowance is £4,000.

The main advantage of the Lifetime ISA is that contributions into the account come with a 25% bonus while you’re under the age of 50. The disadvantage of this ISA is that there are penalties for withdrawing money before you turn 60 or buy your first property. You can compare all Lifetime Investment ISAs here.

What investment ISA is best for over 50s?

There are a number of good ISAs for those over 50, but it depends on your risk. Providers say that investments ISAs are best left for five years so there is still plenty of time to make potential investment gains before retiring. 

Those looking for a managed ISA may want to consider the products offered by Nutmeg and Wealthify. Both of these providers offer a range of lower-risk investment plans that may be suitable for those over 50.

Those looking for a self-managed ISA may want to consider the ISAs offered by Hargreaves Lansdown and AJ Bell Youinvest. Both of these providers offer access to a range of stocks and funds that may be suitable for those over 50.

If your goal is to generate dividend income within your ISA, a self-managed ISA may be your best option. With this type of ISA, you can build a portfolio of income-generating investments. All income within the ISA will be tax-free.

Compare Stocks & Shares ISA Accounts

Use our ISA account comparison to choose the best ISA account for you from the top ten ISAs available.

When comparing investment ISA platforms, there are a number of things to consider including:

  • The range of investment options each platform offers. Some ISA providers offer more investment options than others. For example, some offer access to a wide range of investments including domestic and international shares, investment trusts, funds, ETFs, and bonds. Others, however, only offer access to certain asset classes or products.
  • The fee structure of each platform. Every ISA provider has a different fee structure. This needs to be considered carefully because fees and charges can have a large impact on investment returns over time. Fees and charges to consider include annual custody charges, entry and exit fees, trading commissions, and FX charges. Some ISA providers offer fee calculators that allow you to compare fees. These can be useful when comparing platforms.
  • DIY or self-select. Some ISAs are designed for DIY investors. Others are designed for beginner investors or those who don’t want the hassle of managing their own investment portfolio.
  • The research and investment tools offered by each platform. Some ISA providers offer a range of features designed to help you make investment decisions. Others, however, just offer basic trading and investing services.
  • The user-friendliness and reliability of each ISA platform. Ideally, you want a platform that is well laid out, easy to use, and can be accessed via an app so that you can monitor your account and place trades on the go. You also want a platform that is reliable and always available.
  • The customer service levels of each ISA provider. Some investment providers are better than others when it comes to providing support. Service and support can be important, particularly if you are new to investing.
  • The type of ISA. Some ISAs are known as ‘flexible ISAs.’ A flexible ISA enables you to make a withdrawal and put the money back into the account in the same year without impacting your ISA allowance.

When comparing ISA providers, the key is to think about what you’re looking for from the provider. This will help you find the right ISA for you. Are you looking for a sophisticated product designed for advanced investors? Or are you looking for a basic, low-cost ISA product?

Stocks & Shares ISAs Explained

A Stocks & Shares ISA is a tax-efficient investment account. When you invest within a Stocks & Shares ISA, all the capital gains and income generated from your investments are completely tax-free.

Stocks & Shares ISAs are available to UK residents aged 18 and over. For those under the age of 18, the Junior ISA is available. You can own multiple Stocks & Shares ISAs, however, you can only contribute to one per tax year.

The maximum amount that can be paid into a Stocks & Shares ISA per tax year is currently £20,000. This is the annual ISA allowance. The annual allowance covers all types of ISAs meaning that if you own different types of ISAs, you can only invest a total of £20,000 across them in any one tax year.

In this episode of Good Money Guide TV we discuss what stocks and shares ISAs are, who they are for and the pros and cons of investment ISAs.

Stocks and shares ISA rules

The rules for investing in a Stocks & Shares ISA are as follows:

  • You can open an account if you are a UK resident aged 18 and over.
  • You can invest a maximum of £20,000 per tax year. This is the maximum you can invest across all your ISA accounts per tax year. So, for example, if you invest £5,000 in a Cash ISA during the year, you can only invest £15,000 in a Stocks & Shares ISA.
  • You can have as many Stocks & Shares ISAs as you want but you can only contribute to one per tax year.
  • You can withdraw your money from a Stocks & Shares ISA at any time.
  • If you withdraw money from your ISA and pay it back into the account in the same tax year, it will count towards your ISA allowance. This rule does not apply to ‘flexible’ Stocks & Shares ISAs.

Investments that can be held in a stocks and shares ISA

A stocks and shares ISAs let you invest your money in a wide range of investments, including:

  • Shares in companies listed on the UK stock market
  • Corporate and government bonds – compare bond brokers
  • Exchange-traded funds – compare ETF brokers
  • Investment trusts
  • Funds (OEICs or ‘open-ended investment companies’) – compare fund platforms
  • Overseas shares and corporate bonds that are listed on a recognised stock exchange

You can also invest your money in ethical investments and most managed ISA accounts have ethical portfolios and self-select providers publish a list of ethical funds to make the task of identifying them easier.

There are also limits, for example you cannot use an investment ISA to trade derivatives.

Different types of investment ISAs

The two main types of investment ISA:

  • Self-select stocks & shares ISA – A self select investment ISA puts you in complete control of choosing your investments, monitoring their performance and managing your portfolio.
  • Managed investment ISA –  With a managed investment ISA, a team of experts will make all of the decisions about where your money is invested. Some providers have a range of “ready made” investment portfolios which they run on investors’ behalf. Filling in the platform’s online questionnaire will help you to decide which portfolio is most suited to your circumstances.

Managed accounts versus self-select stocks & shares ISAs 

Some ISA providers cater to DIY investors and provide all the tools investors need to manage their own portfolios. Others, however, offer managed products designed for beginner investors and those who do not want to manage their own portfolios.

There are pros and cons to both types of accounts. The main advantage of using a DIY platform is that you’re likely to have more choice in terms of investment options. Typically, these kinds of platforms offer access to a wide range of shares, funds, ETFs, and bonds. On the downside, these platforms tend to be more complex and sometimes charge higher fees.

The main advantage of using a managed platform is that it’s generally easier to construct an investment portfolio. Often, you can set up a portfolio within minutes. On the downside, you’re likely to have less investment options to choose from.

The best option for you is likely to depend on a few issues including:

  • Your investment experience. DIY platforms are more suited to those with considerable investment experience who are comfortable managing their own money. By contrast, managed platforms are generally more suited to beginner investors. With a managed platform, you don’t have to worry about choosing your own investments as the provider will do that for you.
  • The time you have to devote to managing your investments. DIY platforms are more suited to those who have time to manage their money. Managed ISA products are well suited to those who don’t have the time to manage their own investments. With managed products, you can get set up in minutes and you don’t need to spend time researching investment opportunities.

Here’s how to research funds for DIY investing.

Advantages of stocks and shares ISA accounts

The advantages of investing within a Stocks and Shares ISA include:

  • Tax efficiency. Within this type of ISA, all investment gains and income are completely tax-free. This is a valuable benefit. Over the long term, you could potentially save tens or even hundreds of thousands in tax by investing within a Stocks & Shares ISA.
  • High returns, at least potentially. Through a Stocks & Shares ISA, you can gain access to a wide range of investments including shares, funds, investment trusts, ETFs, bonds, and more. Over the long term, these kinds of assets tend to generate much higher returns than cash savings. UK shares, for example, have returned around 5% per year in real terms (above inflation) over the long run, according to the Barclays Equity Gilt study.
  • Flexibility. Stocks & Shares ISAs are generally very flexible. With this type of ISA, you can build an investment portfolio that matches your own financial goals and risk tolerance. You can also access your money at any time.

Disadvantages of stocks and shares ISA investing

Stocks & Shares ISAs do have some disadvantages. Investors should be aware that:

  • There are ISA contribution limits. You can only invest a maximum of £20,000 per tax year within this type of ISA. If you are looking to invest more than this, you will have to invest the excess capital in another type of investment account such as a general investment account or Self-Invested Personal Pension (SIPP). The annual ISA allowance cannot be rolled forward.
  • You can lose money. A Stocks & Shares ISA doesn’t have a fixed return. Instead, its overall performance depends on how well the underlying investments perform. While assets such as shares, funds, and ETFs tend to generate strong returns over the long term, they can generate negative returns at times. So, there’s always the chance that your Stocks & Shares ISA could fall in value.
  • There are fees to invest. Some fees that ISA providers charge include annual custody charges, trading commissions, FX fees on international investments, and exit fees. Fees and charges need to be considered carefully when comparing platforms as they can have a large negative impact on your investment returns over time.
  • Withdrawals can impact your ISA allowance. In most cases, if you withdraw money and then put it back into the ISA in the same tax year, it will count towards your annual allowance. Some ISAs, however, do allow you to take money out and pay it back into the account in the same tax year without affecting your annual ISA allowance. These are known as ‘flexible ISAs.’
  • There is no tax relief on contributions into a Stocks & Shares ISA.
  • You cannot have a joint account.

Here is everything you need to know about stocks and shares ISAs in our ISAs explained piece.

Stocks & Shares ISA investing limits

You can invest up to £20,000 per tax year in a Stocks & Shares ISA. However, this is the limit across all your ISAs.

So, for example, if you have already invested £10,000 in a Cash ISA during the tax year, you’ll only be able to invest £10,000 in your Stocks & Shares ISA. The tax year runs from 6 April to 5 April. After the 5th April ISA deadline, you receive a new £20,000 allowance.

As for how much money you should invest in a Stocks & Shares ISA, this will depend on your personal financial situation.

If you have a substantial amount of savings to invest, you may want to consider making a large upfront contribution into your ISA to make use of your ISA allowance.

By contrast, if you have a lower level of savings but a high level of income, you may want to consider making larger regular contributions into your ISA.

You should not invest money that you are likely to need in the short term in a Stocks & Shares ISA. In the short term, ISA investments can fluctuate in value meaning that you may not get back what you invested if you withdraw your money soon after depositing it. Investments within a Stocks & Shares ISA should be viewed as long-term investments.

If you have more than £20,000 to invest, you can either invest it in another type of account such as a general investment account or a SIPP, or wait until the next tax year to invest it in your ISA.

Here is how to invest in a stocks and shares ISA.

Stocks and shares ISA fees

One of the most confusing aspects of investment ISAs is the plethora of fees and charges levied by providers.

If you’re investing through an online platform or fund supermarket, the first fee to look out for is the “platform” or “custody” fee. This will either be a flat fee, which tends to be more cost-effective for very large sums of money, or a percentage of the value of your shares/funds.

Other fees to compare are the fees for buying and selling investments – these can range from £0 to over £15. If you hold funds, you’ll also pay an annual management charge to the fund manager, and if you’ve opened your account via a financial adviser there will be advice fees to pay.

Comparing the various fees will help you to determine whether your current ISA provider is overcharging you. Providers sometimes change their charging structures so it’s important to make sure it is still as cost-effective as when you first opened your account.

It is possible to transfer your ISA from one provider to another, but you might have to pay exit fees in order to do so. If you’re happy with your investments you can request an “in specie” transfer, which is when all your investments are moved to your new provider. A cash transfer – when your investments are sold and the proceeds passed to the new provider – tends to be quicker but your money will be out of the market, meaning you could miss out on any share price gains.

Stocks & shares ISAs versus SIPPS

Whether you should invest in an ISA or a SIPP will depend on your personal circumstances.

ISAs and SIPPs both have their advantages and disadvantages. The main advantage of investing in an ISA is the flexibility you have – you can access your money at any time. One disadvantage is that you can only invest £20,000 per tax year.

The main advantage of investing in a SIPP is that you receive tax relief on your contributions. This is essentially a bonus from the government for saving for retirement. One disadvantage of a SIPP, however, is that you cannot access your money until age 55 and then you can only withdraw 25% tax-free.

Stocks and shares ISAs versus Cash ISAs

Cash ISAs are safer because you’re not exposed to investment risk. However, interest rates on cash ISAs are very low, so your money could be eroded by inflation and fall in value over time.

Other ISAs include innovative finance ISAs, which enable you to invest in peer-to-peer loans; junior ISAs, which are for people under age 18; and lifetime ISAs, which let you save for your first home and/or retirement.

The best ISA type for you will depend upon several things; your attitude to risk, how much you have to save and whether you prefer to earn consistent interest at a potentially lower rate.

You might prefer to save in a cash ISA for lower returns but also have the security of knowing that your deposit will not decrease in value.

Alternatively, if you’re willing to take on more risk, investing in stocks and shares with an investment ISA may mean you are exposed to more volatility in the short and medium-term but could earn larger returns in the long term.

Weigh up the advantages and disadvantages of Investment ISAs vs cash ISAs here.

Stocks & Shares ISA FAQ:

Opening a Stocks and Shares ISA is typically a straightforward process. With most providers, you can open one online through the provider’s website or app.

To open a Stocks & Shares ISA, you will need to provide the ISA provider with:

  • Your full name
  • Your date of birth
  • Your address for the last three years
  • Your phone number and email address
  • Your National Insurance number
  • Your nationality (ISAs are only open to UK residents)
  • Some proof of identification

You’ll also need to set up an online account. This will involve creating a login username and a password for your account.

Usually, the whole account opening process only takes a few minutes. Once your ISA is set up, you can add money to the account via your debit card. As soon as the money is in your account, you can begin investing.

Money held in a stocks and shares ISA can grow free from income tax. If you sell investments and make a profit, you do not have to pay capital gains tax.

You can invest up to £20,000 across all your ISAs each tax year.

You can invest your stocks and shares ISA money into shares, investment trusts, open-ended investment companies (OEICs), unit trusts, government bonds and corporate bonds.

Self-select ISAs give you complete control over choosing your investments, monitoring their performance and rebalancing your portfolio.

Any dividends you receive on shares held within an ISA are tax-free.

 

Investments held in a stocks and shares ISA are covered up to £85,000 if the platform or broker enters default. You aren’t covered for any losses you make as a result of your investments performing poorly.

 

Unless you invest through a managed ISA, where experts choose and monitor your portfolio, you have sole responsibility for your ISA making money.

Investments held in a stocks and shares ISA are covered up to £85,000 if the platform or broker enters default. You aren’t covered for any losses you make as a result of your investments performing poorly.

You can own multiple stocks and shares ISAs, but you’re only allowed to pay into one of them in each tax year.

The maximum contribution limit for each financial year is £20,000. This £20,000 can be split as you like between one investment ISA and one cash ISA.

You can keep both cash  and stocks and shares ISA accounts open from previous financial years alongside your new ISAs but you will only be able to pay into one of each type in the current financial year.

Old ISA account interest rates and charges and fees can change. So it is worth checking the terms and conditions of each account you have open carefully so you don’t end up paying more or earning less in interest.

There are many different approaches to investment, but a popular method of reducing risk is to drip feed money into an ISA over the course of a year. This ensures that the investor is protected against drops in the value of the equities. For example, if £5,000 is invested in a fund in March and it drops in value by 20%, then the investor will be left with £4,000. A drip feeder would buy £2,500 in March, which would be worth £2,000 in April, and could then buy a further £2,500 at the lower price. This would leave the investor with £4,500 and a larger stake in the fund than the non-drip feeding example.

By logging into your ISA account you can view the performance of each underlying investment and the overall performance of your portfolio. Some providers offer charts showing how your portfolio has performed over time.

No – as with any investment, you could end up with less money than you originally invested.

Investing within a Stocks & Shares ISA involves risk. However, there are a number of ways you can reduce the investment risk within your ISA.

One way is to invest in lower-risk investments. These kinds of investments are available on both managed and DIY ISA platforms. Wealthify, for example, offers a ‘Cautious’ plan. Meanwhile, Hargreaves Lansdown offers access to many lower-risk funds.

Another way to reduce investment risk is to diversify your portfolio so that it contains a mix of different assets. This will help reduce overall portfolio risk.

It’s worth noting that if your ISA provider is regulated by the FCA, you will be covered by the Financial Services Compensation Scheme (FSCS) if the provider fails (up to £85,000). The FSCS does not cover regular investment losses, however.

ISA investments such as shares, funds, ETFs, and investment trusts are constantly fluctuating in value. So, it’s not unusual to see the value of your ISA fall in the short term. Stocks & Shares ISA investments should be viewed as long-term investments (5+ years). History shows that, over the long term, assets such as shares, funds, and ETFs tend to provide healthy, inflation-beating returns.

Historically, shares have delivered excellent long-term returns for investors. Over the long run, UK shares have returned around 5% per year in real terms (i.e. above inflation) according to the Barclays Equity Gilt study. That compares to around 1.3% for UK government bonds and around 0.7% for cash. US shares have performed even better. Since 1926, the main US stock market index, the S&P 500, has returned about 10% per year.

It’s important to understand, however, that not every stock has performed this well. To obtain these kinds of returns from the stock market, you need to own a whole portfolio of shares. It’s also important to understand that shares do not rise in a straight line. In the short term, share prices move up and down. To generate good returns from shares, you generally need to invest for the long term.

When choosing shares to invest in, there are a number of things to consider including:

  • The company’s growth prospects. Companies that grow substantially over time tend to be good investments.
  • The company’s level of profitability. Companies that are highly profitable tend to be good investments over the long run. Companies that are not profitable are generally higher-risk from an investment point of view.
  • The company’s balance sheet. Companies that have weak balance sheets tend to be higher-risk investments.
  • The company’s dividend track record. Companies that consistently increase their dividend payouts tend to be good long-term investments.
  • The company’s valuation. Companies that have very high valuations tend to be higher-risk investments.

It’s important to think about your financial goals and risk tolerance when choosing stocks for your ISA. If your risk tolerance is low, it’s sensible to invest in lower-risk, dividend-paying shares. If your risk tolerance is high, you may want to allocate some capital to higher-growth shares. It’s important to remember that, in investing, risk is directly related to return. The higher the potential return on offer, the higher the risk.

You can sell and rebuy shares in an ISA, normally without affecting your annual ISA allowance. However, you do need to check with your ISA provider to ensure that this is definitely the case.

Further reading: How to buy shares.

There are two main ways to improve the performance of your Stocks & Shares ISA.

The first way is to invest in better underlying investments. This is easier said than done, however. No one knows how an investment will perform in the future and past performance is not an indicator of future performance. That said, if you have a managed ISA and it has consistently underperformed other managed ISA products in the past, it may be worth transferring the ISA to another provider.

The second way is to reduce fees. Over time, fees can have a large negative impact on investment returns. It’s important to ensure that the fees you are paying are reasonable.

You can own multiple Stocks & Shares ISAs, however, you can only pay into one Stocks & Shares ISA per tax year. The annual allowance is £20,000.

You are allowed to pay into a Stocks & Shares ISA and a Lifetime ISA in the same tax year as long as you don’t pay in more than £20,000 in total.

Yes. Transferring old Stocks & Shares ISAs into a new account can be a smart move. When your accounts are consolidated, it’s easier to manage your money.

Generally speaking, transferring an old ISA to a new account is a straightforward process. Usually, it’s simply a matter of applying for a transfer with your new provider. They will contact the old provider and begin the transfer. Once the transfer is complete, you can invest the money in your new ISA. Usually, the process is completed within a few weeks.

Those wishing to transfer an ISA should be aware of the following:

  • Transfers can be made as cash or stock.
  • Transferring an ISA does not count towards your ISA allowance.
  • You can transfer an ISA as many times as you like.
  • Some providers charge exit fees (sometimes per stock transferred). It’s worth checking this before you execute a transfer.
  • You cannot transfer your ISA to an ISA owned by someone else.

If you wish to execute a partial transfer, you should speak to your providers to see if this is possible. Not all ISA providers allow partial transfers.

You do not need to transfer a Junior ISA into an adult Stocks & Shares ISA. This should be done automatically by the provider.

Fund performance is constantly changing. This means that the best-performing funds today may not be the best-performing funds next week or next month.

Identifying the best-performing funds is generally an easy process, however. For example, if you want to find the best-performing funds on Hargreaves Lansdown, simply navigate to the ‘Funds’ page and then filter funds by a ‘Sector’ so that you’re comparing the performance of similar funds. Then hit ‘Search.’ Once the list of funds is generated, you can sort them by discrete performance or cumulative performance. If you sort the funds by cumulative performance, you can find the best-performing funds over 3 months, 6 months, 1 year, 3 years, and 5 years.

It’s important to remember when picking shares to invest in that past performance is not an indicator of future performance. So, a fund that has performed well in the past may not necessarily perform well in the future.

Here’s how to buy shares so you can get the best value investment options for your money.

With most Stocks & Shares ISAs, if you withdraw money and then put it back into the ISA in the same tax year, it will count towards your annual allowance. However, some ISAs allow you to take money out and pay it back into the account in the same tax year without affecting your annual ISA allowance. These are known as ‘flexible ISAs.’

Withdrawing money from a Stocks & Shares ISA is typically a straightforward process. Usually, it’s just a matter of logging in to your account and selecting ‘withdrawal.’ It’s worth noting, however, that your investments will have to be sold before you can withdraw your money. This process can take several days.

If you die, money and investments held within your Stocks & Shares ISA will be passed on to your beneficiaries.

After your death, your Stocks & Shares ISA will retain its tax benefits until one of the following things happens:

  • The administration of your estate is completed
  • The Stocks & Shares ISA is closed by your estate executor

If neither of these things happen within three years and one day of your death, your ISA provider will close your account.

In your will, you can leave your ISA to whoever you like. If you have a spouse or civil partner, they can inherit your ISA’s tax-free status as a one-off boost to their own ISA allowance.

You can own multiple stocks and shares ISAs, but you’re only allowed to pay into one of them each tax year.

There is an annual limit on how much money you can put into ISAs, which for the 2020/21 tax year is £20,000. This limit is split across all types of ISAs, so you could invest your whole £20,000 in a stocks and shares ISA or split it between a cash ISA and a stocks and shares ISA.

You can keep old ISA accounts from previous financial years open and continue to earn tax-free returns.

You can transfer ISAs from previous years into your new account, as long as your ISA provider allows ISA transfers.

This will consolidate your investments and keep everything in one place.

Yes. Most Stocks & Shares ISAs are suited to long-term investing. The best ISAs for long-term investing, however, are those that offer the combination of a wide range of investment options and competitive fees. Over the long term, fees can have a large negative impact on investment returns so it’s important to find a provider that offers low fees.

A key advantage of Stocks & Shares ISAs is that they allow you to withdraw your money at any time. Generally speaking, it’s usually quite easy to access money that has been saved in an ISA although you may have to sell your investments first and this can take a few days.

Those looking to make regular withdrawals from their Stocks & Shares ISA may want to consider a ‘flexible ISA.’ This type of ISA enables you to withdraw money and then put it back into the ISA in the same tax year without impacting your ISA allowance. Most providers do not offer flexible Stocks & Shares ISAs

Stocks & Shares ISAs have been around in their current form since 2008. Before this, they were known as ‘Maxi ISAs.’ Prior to 1999, they were known as ‘Personal Equity Plans’ (PEPs).

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