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.
Stocks and shares individual savings accounts (ISAs) let you invest without having to pay tax on your profits. Many investment providers offer ISAs, some which have ready-made and fully-managed portfolios, and others that let you choose individual shares to invest in. Compare stocks and shares ISAs in the table below and read our guide to what they are and how they work.
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.
What is a stocks and shares ISA?
A stocks and shares ISA is a type of ISA for investment accounts, which lets you invest your savings in the stock market without paying tax on your profits.
There are several ways that you can invest with a stocks and shares ISA. For example, you might do some research and open an account with a share trading provider and decide that you want to invest in companies that you know or use, like Greggs, boohoo or Barclays. You can choose the shares yourself and manage the investments yourself — we’ve listed these below as DIY stocks & shares ISAs.
Another option is to choose a managed account, known as a robo-advisor and let the company look after the money for you. You might choose which sector you want to be invested in, or how ethical your investments are (which we cover later on), but the managers will keep track of your investments and try to ensure that they perform in the way that you want them to using some information you give them. We’ve listed these below as robo-advisor stocks & shares ISAs.
Some providers have both robo-advisor options (known as managed portfolios) as well as the chance to invest in specific stocks and shares. If you want one of these, look at some of the reviews of DIY providers to see if they also offer managed portfolios.
With a stocks and shares ISA, your money is at risk – but the potential reward is growth on your investments that is typically higher than your average savings account.
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 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 is an ISA?
ISA stands for “individual savings account”. Every tax year, you have a certain limit that you can save into ISAs, which is £20,000 for the 2023/2024 tax year. This £20,000 is known as your “ISA allowance”. You’re allowed to pay into one of each type of ISA in each tax year, with the deposits for all of your ISAs totalling no more than the ISA allowance. The types are: stocks and shares ISA, cash ISA, lifetime ISA and innovative finance ISA.
All profits you make from your ISAs won’t be subject to tax. Mostly, ISAs are just “wrappers” for savings or investment accounts, like an invisibility cloak that lets you, totally legally, hide your profits from the tax man.
You can divide your ISA allowance into a few different types of ISA, including the lifetime ISA, a cash ISA and, if you opened one before they stopped opening new accounts, a help to buy ISA. You can only pay into one of each type of ISA in each tax year.
For savers under 18, the annual junior ISA (JISA) allowance is £9,000. Between 16 and 18 the child also has a £20,000 allowance if they want to open a cash ISA.
Stocks and shares ISAs jargon explained
Allowance. This refers to the amount you can contribute each year to your ISAs. The 2023/2024 ISA allowance is £20,000. You must not exceed this allowance across all of your ISAs and can’t contribute to more than one of the same type in one tax year.
Robo-advisor. This is a type of provider that invests on your behalf. They tend to cost a little more but you can put your feet up while someone else manages your investments.
Lifetime ISA (LISA). This is a type of ISA that helps you save up to buy a home or for your retirement. You can save a maximum of £4,000 per year with these and you get a 25% top up from the government.
Before you begin: Do you already have an ISA?
Before you open an ISA, check that you don’t already have one and that you’ve not used your allowance already.
Cash ISAs are a type of savings account, and lifetime ISAs can be cash or stocks and shares accounts. If you already have one, check how much money you’ve paid into it in the current tax year (since April 6), that’s how much of your £20,000 ISA allowance you’ve used. Whatever’s left is how much you can pay into a stocks and shares ISA.
Should I open a stocks and shares ISA?
Before you ask this, ask yourself what your financial goals are and what your current situation looks like.
- If you’re able to put money aside and leave it for a long time, then a stocks and shares ISA is a good bet.
- If you have lots of debt, you should look into ways to clear debt first.
- If you might need quick access to the money, you should look into a current account or easy access savings account.
- If you want to build a pot of money and still earn interest, look into simple savings accounts.
- You should also be aware that stocks and shares ISAs are riskier than a savings account or cash ISA.
Before you open a stocks and shares ISA thinking you’re the next Warren Buffet, you need to weigh up whether you’re willing to take the risks that come with investing. Some providers, such as IG, Moneyfarm and Fidelity have risk assessment quizzes which give you an indication of how suitable investing is for you and might even suggest a ready-made portfolio.
A simple rule of thumb is this: if your investments would keep you up at night, you might be better suited to a cash ISA.
How much do stocks and shares make?
There are plenty of different ways to work out how much stocks and shares return over a period of time – you can look at performance of specific providers’ funds to see how they’ve performed over several years or at specific funds.
Here’s a graph showing the return of the FTSE 100 and the S&P 500 against the average rate of return on a savings account. You can also see the impact of inflation, which is the decrease in spending power of money.
The returns you’ll receive could differ from these figures and remember that past performance isn’t indicative of future results. Your returns will depend on how much you invest, what you choose to invest in, and how long you invest for.
You can check out the performance tables for ISA providers on their websites.
The risks of stocks and shares ISAs
It’s not always plain sailing with stocks and shares, sometimes the waters can be choppy, for example, the financial crash in 2008 — the FTSE 100 had a terrible year, returning -28.3%.
If you’d invested £10,000 in January 2008, it would have been worth just £7,170 by the end of the year. If you’d started investing in 2008 and held your investment until the end of 2017, your annual return for that 10 year period would have been 5.7%, mainly due to the heavy losses of the financial crash. We saw the same sort of impact at the start of the coronavirus pandemic in 2020, when stocks crashed virtually overnight.
This highlights the importance of diversification and investing for the long term, to even out the peaks and troughs.
What can you invest in with a stocks and shares ISA?
With a stocks and shares ISA you can invest in:
- Shares. Invest in individual companies. A share is a fraction of the company. If the company’s value goes up the share’s value goes up, if not it goes down.
- Corporate bonds. Lend your money to a company in return for interest.
- Government bonds. Same as above, but you’re lending to the government.
- Funds. This is the most common type of investment — a pic-n-mix of lots of investments. Funds can include things like shares, bonds and cash, in different combinations.
- Exchange traded funds (ETFs) These are a type of fund that are traded on stock exchanges like regular stocks and shares.
How do I choose a stocks and shares ISA?
When choosing which stocks and shares ISA you want, consider the following:
- Are you planning on picking individual stocks and shares or do you want a ready made portfolio? If you want the latter, you’re looking for a robo-advisor.
- How much do you want to invest? Some providers have a minimum deposit, so take that into consideration. For some, the fees will be lower for higher amounts so roughly work out your annual fees as part of your comparison.
- Are you interested in a range of tools? If you want to use advanced charting tools or advanced company financials, check out what providers have before deciding.
- Do you want educational tools? Some providers have tools available to help you learn how to invest – consider whether these will be useful for you.
Can I invest ethically in a stocks and shares ISA?
You can! There are a few different ways you can invest ethically.
- Ethical companies. The first way is to find ethical companies and buy shares in them. You can search for individual companies here at Finder to see their ESG scores.
- Ethical funds. The second way is to find ethical funds and invest in those. Using a fund screener on your chosen provider website you can search keywords like “ethical”, “ESG”, “sustainable” and “impact” to find some.
- Ready-made portfolios. The third way is to choose a robo-advisor and invest in an ethical ready-made portfolio. Lots of providers have ethical options to choose between.
What else do I need to know?
- To open an ISA you have to be 18 or older.
- You must be a UK tax resident.
- You can only contribute to one stocks and shares ISA per tax year.
- You can usually transfer your existing ISA to a new provider for free.
Pros and cons of stocks and shares ISAs
- Potential for higher returns than savings accounts
- No tax on interest or dividends
- The chance to help companies you love grow
- Investments can go up and down.
- Fees can take a chunk of your investment.
A stocks and shares ISA lets you invest without paying any tax on your profits. They’re offered by most investment providers, usually at no added cost. This means that you can stop tax from eating at your profits and you don’t have to worry about declaring capital gains for tax purposes.
Frequently asked questions
ESG: Is the investing landscape changing for good?Finder published a paper in April 2021 on the trends and challenges in environmental, social and corporate governance (ESG) investing, as well as the factors that will help to shape the future of retail investing in the UK. Our paper includes original research, contributions and predictions from experts including Julia Dreblow, founding director of SRI Services and the Fund EcoMarket tool, Clare Reilly of PensionBee, Josh Gregory, founder of Sugi, and Plum's Thanos Bismpigiannis.
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