Stocks and shares ISA vs general investment account

Should you hold your investments in an ISA, a general account, or both? Here's the lowdown on your options.

If you’ve got money to invest, you may be wondering about the differences between stocks and shares ISAs and general investment accounts, and which is better for you. We’ve rounded up the pros and cons to help you decide.

What is a stocks and shares ISA?

An ISA (individual savings account) is a tax-efficient way of saving, with an annual contribution limit of £20,000. Put simply, you usually don’t need to pay tax (of any kind) on returns you make on money you put into an ISA.

There are several different types of ISA. With a cash ISA, for example, your money is put into a cash savings account that earns interest. With a stocks and shares ISA, your contributions are invested into assets such as funds or, as the name suggests, stocks and shares. Your returns will depend on the performance of the investments in your stocks and shares ISA (plus any fees you may need to pay along the way).

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What is a general investment account?

As with a stocks and shares ISA, with a general investment account the money you put in is invested into funds, stocks and shares, bonds and other assets. Your returns will depend on the performance of your investments (after any fees are deducted). Any profit you make between buying and selling investments may be subject to capital gains tax. Depending on the nature of your investments, other forms of tax may also apply (such as dividend tax on dividends and income tax on bond interest). Unlike a stocks and shares ISA, there’s no limit on how much you can pay into a general investment account each year.

Stocks and shares ISA key facts

  • Any returns you make within an ISA’s “wrapper” are tax-free (from capital gains tax, dividend tax and income tax).
  • There is a cap on the amount you can contribute to a stocks and shares ISA each tax year, known as the ISA allowance. As of the 2023/2024 tax year, this cap is £20,000. It applies across all types of ISA you may hold (including cash, stocks and shares, innovative finance and lifetime ISAs).
  • You can only open and pay into one stocks and shares ISA per tax year.
  • While, in general, it’s recommended to keep money invested for at least 5 years (to smooth out any short-term market volatility), you can usually withdraw money from a stocks and shares ISA whenever you want.
  • You can either take direct control over managing the investments in a stocks and shares ISA, or opt for a managed account (where the provider recommends investments based on your preferences, and manages any trades on your behalf).
  • As with any type of investment, your capital is at risk and the value of your investments may go down as well as up.

General investment account key facts

  • Any returns you make on money held in a general investment account (such as investment growth, bond interest or dividend payments) may be subject to relevant taxes if the gains, interest or dividends exceed your annual allowances.
  • There’s no limit on how much you can contribute to a general investment account.
  • There are no restrictions on how many general investment accounts you can open and pay into.
  • You can usually withdraw money from a general investment account whenever you want. However, as with any form of investing, it’s recommended to keep your money in place for at least 5 years, as this should smooth out the impact of any short-term volatility in the market.
  • The value of your investments may go down as well as up, and your capital is at risk.

What are the main similarities between stocks and shares ISAs and general investment accounts?

There are a number of similarities between stocks and shares ISAs and general investment accounts, as well as number of differences (which we explain below). Here are some key similarities:

  • How to open an account. In both cases, you’ll need to find a provider – such as those we include in our guide to investment platforms. Head to its website or app to sign up, provide some details and wait for the provider to confirm your account is open. Once that’s done, you can choose and buy investments.
  • Range of investments. Often, the same provider will offer the same range of investments for both its stocks and shares ISA and its general investment account, though there may sometimes be differences.
  • Investment risk. With both types of account, your capital is at risk and the value of investments may go down as well as up. The level of risk will depend on the investments you choose.
  • Flexible withdrawals. In both cases, you can usually access your money whenever you want. If your money is invested, you’ll usually need to wait a few days for your assets to be sold before you withdraw the cash.
  • Transferability. You can move money from one provider to another. A key difference, though, is that if you’re transferring a stocks and shares ISA between providers, you must use the official ISA transfer process. If you don’t, you’ll impact your tax-free ISA allowance.

What are the main differences between stocks and shares ISAs and general investment accounts?

Stocks and shares ISAGeneral investment account
What are the tax benefits?Returns made within a stocks and shares ISA are free of tax (including capital gains tax, dividend tax and income tax).No tax benefits. Depending on the nature of your investments, profits and/or returns may be subject to capital gains tax, dividend tax or income tax.
What is the annual savings limit?£20,000 across all types of ISA. You cannot contribute above this level.No limit.
How many accounts can you have?1 per tax year. You can also hold 1 cash ISA, 1 innovative finance ISA and 1 lifetime ISA (aged 18–39 only).As many as you wish.
Can you have a joint account?No. Only 1 person can access and save into an ISA.Potentially, depending on the provider and the specific account.

Is a stocks and shares ISA better than an investment account?

Zoe Stabler

Finder expert Zoe Stabler answers

It’s not really a case of better or worse. They’re just different.

Stocks and shares ISAs have one obvious benefit. With a general investment account, you’ll pay tax on any returns that exceed your annual allowances for interest, dividends or capital gains. With an ISA, all returns are tax-free.

However, there’s no annual limit to general investment accounts. You can invest as much as you like without worrying about busting any allowances. And you can open and pay into as many general investment accounts as you like. You can only open and pay into one stocks and shares ISA per tax year.

Bottom line

ISAs and general investment accounts both have pros and cons. Fortunately, you don’t have to choose between one or the other. There’s nothing stopping you holding both at the same time. As a general rule, we’d recommend maxing out your annual ISA allowance first because of the tax benefits. But, if you’ve done so, a general investment account will let you continue to grow your portfolio with no restrictions.

Frequently asked questions

  1. FCA

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.

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