A simple guide to Stocks and Shares ISAs

A Stocks and Shares ISA (sometimes called an investment ISA) allows you to invest in the stock market through assets including shares, bonds and funds. It’s a tax-efficient account, which means you can invest up to £20,000 each tax-free.

To be eligible for a stocks and shares ISA you must:

• be aged 18 or over.
• not have exceeded the ISA annual limit of £20,000 (the annual
• limit can be split between different types of ISA)
• must be either a UK resident, a civil servant working outside the UK or their civil partner.

There are two main methods of investing through a stocks and shares ISA:

• DIY investing – this allows you to make all of your own investment decisions.
• Fully-managed investing – a qualified professional makes your investment choices on your behalf.

Stocks and Shares ISAs allow you to invest in a variety of investment assets, including:

• Stocks and shares – parts of a company.
• Bonds – a type of loan for governments (gilts) or companies (corporate bonds).
• Funds – pool your money with other people to buy different investments e.g. shares and bonds.
• Exchange-traded funds (ETFs) – basically funds but with more flexibility.

Most Stocks and Shares ISAs come with fees to cover the cost of running the account and buying or selling investment assets.

Some of the fees you’ll need to look out for include;

• Platform fees: the amount the platform charges to manage your account
• Share dealing fees: the amount it costs to buy UK shares
• Fund fees: the amount it costs to buy funds
• ETF fees: the amount it costs to buy ETFs
• FX fees: the amount it costs to purchase investment assets in a non-GBP currency
• Admin fees: fees charged for setting up an account, inactivity and other costs

Here’s an example of what fees could cost you:

You invest → £100,000 for 30 years
You get → 5% annual return
You pay → 0.75% annual fee
You lose → £83,629 due to fees

You can open a Stocks and Shares ISA using the following steps:

Choose a provider: Shop around different providers and compare the Stocks and Shares on offer. Check out our best Stocks and Shares ISA guide for our pick of the best Stocks and Shares ISAs available now.

Apply for an account: Most providers allow you to apply for a Stocks and Shares ISA account online within minutes. You’ll need to provide your personal details and National Insurance Number, as well as a payment card to make your first deposit.

Start investing: You can invest up to £20,000 into a Stocks and Shares ISA each tax year (which runs from 6 April to 5 April the following year.)

Monitor your account: It’s important to track your investment performance regularly. You should aim to hold investments for at least 5 years, which will help your portfolio bounce back if changes in the market affect the value of your investments.

Stocks and Shares ISA providers must be regulated and authorised by the Financial Conduct Authority (FCA). That means they must follow strict rules to treat customers fairly and protect their money. Your money will also be protected under the Financial Services Compensation Scheme (FSCS). Up to £85,000 of your money is protected under FSCS if the ethical bank or building society goes bust.

A Stocks and Shares ISA is an effective way to grow your money. That’s because, generally speaking, a Stocks and Shares ISA offers higher returns than a cash ISA or a traditional savings account.

It’s important to remember that investing doesn’t offer a guaranteed return and there’s always a chance that you could lose some or all of your money. That’s why it’s really important to ensure that you have an emergency fund saved in case anything unexpected happens.

If you’re ready to start investing, check out our best Stocks and Shares ISA guide to find the right provider.