All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
With an individual savings account (ISA), you can earn profits from your investments without having to pay any capital gains tax. Each person gets an ISA allowance of £20,000 for the 2022/2023 tax year. Read on to find out the different types of stocks and shares ISA, what you’ll need before you begin and how to open a stocks and shares ISA.
Stocks and shares ISAs vs investment ISAs: What's the difference?
These are two terms for the same thing — an individual savings account in which you hold investments (such as shares), rather than cash (which would be a cash ISA).
How to open a stocks and shares ISA
Here are the basic steps to opening a stocks and shares ISA. it usually takes no more than 10 minutes, depending on how quickly the provider verifies you. You may find that your chosen provider has a couple of extra steps, such as a short quiz that either determines your investment experience (share dealing) or works out how you feel about risk (ready-made).
- Choose how you’d like to invest. You can choose between DIY and ready-made. There are providers that offer both, which would allow you to switch to a new method once you gain more confidence.
- Choose a provider. If you’d like to do it yourself, you’re looking for a share dealing provider that offers ISAs, if you’d prefer a ready-made option, you’re looking for a robo-advisor that offers ISAs. If you’d like a provider with both, you’ll want a share dealing provider that has ISAsand ready made portfolios.
- Click on the link to go to the provider website – if it is app-only, you’ll be prompted to download the app. Select “sign up” to make an account.
- Provide basic information. You may need a form of ID, a utility bill and/or your national insurance number. You may be asked for payment details at this stage, which will be used to top up your account.
- Wait for verification. Once you’re verified, you can go forth and invest.
Types of stocks & shares ISA platforms
- DIY stocks & shares ISAs let you buy individual shares.
- Robo-advisor stocks & shares ISAs have ready-made portfolios for you to choose between.
Compare stocks and shares ISAs
Compare DIY platforms
Here are some DIY investment platforms that offer stocks and shares ISAs. These accounts let you buy individual investments to craft your own perfect blend.
Compare robo advisor platforms
These are platforms that will invest on your behalf – you’ll be able to choose between portfolios that have been made by professionals and will be fully managed going forward.
What are the different types of stocks and shares ISA?
Broadly speaking, you can categorise stocks and shares ISAs into two categories: DIY and ready-made.
Do it yourself
With a DIY platform, you’re in complete control of choosing what you invest in. Think of it like choosing sweets at a pic-n-mix — you want to get a pretty decent variety of different types of sweets, but you also want to make sure you’ve got a nice mix of sweet treats that you enjoy.
Ready-made
With a ready-made platform, you choose between a set of different portfolios that have been made by experts. You can’t swap one stock for another, so there may be investments mixed in that you’re not a fan of, like the pile of milky ways and bountys left in the Celebrations tub after Christmas.
You can get providers that offer both DIY and ready-made. These are good for you if you think you’d like to choose stocks eventually, but would prefer to start off with something ready-made. Longer established platforms tend to have both options available, so the user experience or app might not be as intuitive as those dedicated to one or the other. To find one of these platforms, use our comparison tool and check the boxes for “share-dealing” and “ready-made portfolios”.
Why would I want to open a stocks and shares ISA?
Your investment profits may be subject to capital gains tax when you earn more than £12,300 in profit in each tax year. By investing in an ISA, you’re able to invest up to £20,000 in each tax year and earn investment profit without paying any tax. This is typically the best account to go with first, then once you’ve hit your allowance, you can start investing in a general investment account.
Is it difficult to open a stocks and shares ISA?
It’s not difficult to open a stocks and shares ISA — as long as you’re ready with all of the necessary documents and paperwork, the whole process will only take a few minutes. That means if you make yourself a cup of tea before you begin, by the time you’re done it’ll be the optimum drinking temperature andyou’ll be all set to start investing tax-free!
What do I need before I start opening a stocks and shares ISA?
Before you sit down to open a stocks and shares ISA, make sure you have the following ready:
- A form of ID. Your passport or driving licence is ideal, and you’ll likely just need a photograph.
- Your national insurance number. You might have a card (if you were born before 1996), or you’ll find this on a payslip.
- Bank details. You may need your sort code and account number for direct debits, or your card number for top-ups.
- A recent utility bill. Take a photo of a utility bill or download one from an online account. You may need this to verify your address.
You’ll also want to double check that:
- You haven’t already paid into a stocks and shares ISA in the current tax year; and
- You haven’t already used your £20,000 ISA allowance in the current tax year across all of your ISAs.
How to choose a stocks and shares ISA
The first step when deciding on which stocks and shares ISA to go with is to determine the way you want to invest: DIY or ready-made. You can check out the key difference between these options below.
Once you’ve determined what type of account you want, consider the following:
What types of tools will you want?
DIY
Some platforms have quite complex charting and a great deal of research and fundamentals on each investment — consider how much of this you’ll actually use.
Ready-made
There may be a quiz to help you work out your risk tolerance. Check out what the mobile app looks like and any saving features available to you.
What do you want to invest in?
DIY
Check that the stock exchanges you want access to are on your chosen platform. If you want other types of investment, such as gold or silver, check for these too.
Ready-made
You’ll get a choice between a few different portfolios, usually based on risk. You might also get to choose an ethical or sustainable portfolio.
How much does it cost?
DIY
You typically pay a commission each time you make an investment with DIY platforms. There are low-fee and commission-free platforms. You may also incur a foreign exchange fee if you need to convert your money into another currency.
Ready-made
You’ll typically pay a percentage fee based on the amount you invest. This is usually less than 1%.
Bottom line
It’s really easy to open a stocks and shares ISA, as long as you have ID and some basic details ready. When choosing between providers, you’ll broadly be able to choose between DIY providers and ready-made providers — take some time to understand the difference. Remember that not all investment platforms offer ISAs, so you may notice some missing from our comparison tables.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Frequently asked questions
Warning: the value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results. A stocks and shares ISA may not be right for everyone and tax rules may change in the future. If you are unsure if an ISA is the right choice for you, please seek independent financial advice.
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