The Definitive Guide To Stocks & Shares ISAs

Investing in stocks and shares ISAs is just one way of potentially saving yourself a tidy nest egg for the future. They’re a popular way of saving and investing money as they’re tax-free. But what exactly are Individual Savings Accounts?

In this guide we take you through all you need to know about opening a stocks and shares ISA including the benefits associated with them, as well as the risks. So before you make a decision about your savings plan – take a look at this guide and get in touch if you need any advice on what’s best for you. Make yourself a brew and get comfy because it’s time to get informed!

What are stocks and shares ISAs? 

Stocks and shares ISAs are a way to save money short, medium or long-term. They’re sometimes known as “investment” or “equity” ISAs, and are a great type of investment account whether you’re a beginner or more experienced investor. They’re different to cash ISAs (where you simply add money to the account and get a fixed rate of return per year.) in that the money you put into the ISA is used to buy shares, funds and other types of investments. The funds are free from UK capital gains and they’re tax-free. However, they’re riskier than cash ISAs and more subject to financial market influences. So that’s something to take into consideration when deciding whether a stocks and shares ISA is right for you.

You can contribute up to £20,000 into ISAs in each tax year currently. 


What are returns on stocks and shares ISAs? 

It’s impossible to say for certain the exact return you’ll get from your stocks and shares ISA because it depends on your investment strategy and the exact investments you hold. Plus, market conditions can fluctuate which can impact your ISA. 


Can your stocks and shares ISA grow?

The main reason for people investing in a Stocks & Shares ISA is to get a return on their investment.. They can be really beneficial for long-term savers as in theory, you can benefit from compounding returns over time within the tax-free wrapper. 

However, you need to remember that your savings aren’t protected from losses if you invest in a stocks and shares ISA. If you put money in a stocks and shares ISA, then invest it in funds, shares or bonds, then it’s a ‘risk-based investment.’ They are not guaranteed savings. So, if the things you invest in don’t do well, you could lose some or even all of your money.


Are stocks and shares ISAs better than cash ISAs?

Stocks and shares ISAs have the same tax benefits as cash ISAs as all returns are free from UK tax. However, when you get down to the nitty gritty, cash ISAs and stocks and shares ISAs are really different from one another. 

Cash ISAs are basically savings accounts that you don’t pay tax on. The interest you make won’t be subject to changes in the market and if your provider folds your money is also covered by up to £85,000 by the Financial Services Compensation Scheme (FSCS). This means you could get back your money upto £85,000.

When it comes to stocks and shares ISAs, it’s worth keeping in mind that they’re:

  • Better for longer term savers
  • Potentially comes with more risk than a cash ISA.
  • FSCS protected only up to £50,000, compared to £85,000 with a cash ISA.

One type of ISA is not necessarily better than the other, it really just depends on what type of investment you’re looking to make and how risk averse you are.


Can I buy shares through an ISA?

If you opt for a stocks and shares ISA, you can potentially choose which investments to put inside.

You really can be as hands on or hands off with your investments as you like. It’s your ISA after all!


Can you have more than one stocks and shares ISA? 

You can have multiple ISAs at the same time however you can’t pay into more than one ISA of the same type in the same tax year. So if you wanted to open two stocks and shares ISAs and pay into both within the same year, you can’t.

However, what you can do is split your £20,000 allowance between two different types of ISAs. For example, if you wanted to open a cash ISA and a stocks and shares ISA, you could pay into both by splitting your allowance between the two. So, for example, you could put £12,000 into a stocks and shares ISA and £8,000 into a cash ISA.

You’re also allowed to open a stocks and shares ISA, with one provider, leaving that money to grow and then open another one with a new provider in a new tax year.

Once the new tax year begins on April 6 and the allowance resets, it’s up to you whether you decide to top up existing ISAs,open new ones or transfer your funds to a new provider. So there is some flexibility when it comes to stocks and shares ISAs – you just have to follow a few rules.

Once you open a new ISA, you can move over any money you have from your old account to your new provider. ISA transfers are different to paying money into an account for the first time as they don’t count as part of the current year’s £20,000 allowance.


It’s really important when moving money between your ISAs that you don’t simply make a withdrawal yourself. If you do this you’ll lose the tax benefits. You need to tell your new ISA provider that you want an ISA transfer and let them sort it out.


How to choose the best stocks and shares ISA

It’s hard to definitively say who has the best stocks and shares ISA, it’s more about finding the best fit for you and your specific circumstances. Some stocks and shares ISAs are better value if you have a lot of money and you want to buy and sell investments frequently. Whereas others are better for smaller, less active investors.

  • There are a number of providers of stocks and shares ISAs across the UK, so it;’s a good idea to speak with an adviser like our team at Hilltop.

However you choose to go about it, you should always find out the fees and the range of investments on offer before opening an ISA. We can help you find the best stocks and shares ISA for you and your specific financial goals.


Stocks and shares ISA expert 

If you’ve made it to the end you deserve a medal! We love this stuff so we could talk about it forever but we’ll leave it there for now. We’ve covered most of the things you need to know about opening a stocks and shares ISA but nothing beats speaking to an actual person. So if you’re thinking about opening an ISA and want some help – let’s have a chat. We’re experts in stocks and shares ISAs and we’d love to help you plan for your future. For ISA investment advice, speak to one of our advisors.

Important information: Our website offers information about investing and saving, but not personal advice. If you’re not sure which services are right for you, please request advice from Hilltop’s independent financial advisers. Remember that investments can go up and down in value, so you could get back less than you put in.

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