Stocks and Shares ISAs
Great tax-free savings accounts. Tend to do better than cash over the longer-term. But buckle in for a bouncy ride!
4 quick facts
Save up to £20,000 each year
Get access to your money when you need it
Pay no tax on profits you make
Get going online from just £1 a month
Don't let the ISA babble put you off. It's just a savings account. Think of it like a tupperware see-through tub into which you can put either cash or investments. And add more every year as you save.
The stocks & shares ISA is like a quarantined investment account, keeping the taxman's sticky mitts off your savings. If you keep your investments sheltered in this ISA tub, any increase in the value of your investments and any income you receive, is basically tax-free. So it's a bit of a no-brainer if you're buying shares, funds or investments.
You don't need to be super rich to get going – some online ISAs will let you start with a lump sum or direct debit of just £1.
Investing for beginners - Audio Guide
What can you invest in?
The main decision is whether you're plumping for safe yet dismal cash. Or the more spicy stocks and shares option. Although it's called a stocks & shares ISA, it's actually a bunch of different assets and investment types which carry different levels of risk. Stocks & shares being at the riskier end. You can combine the assets to help lower the risk and less confident investors should look at 'multi-asset' funds where someone does all the blending for you. If you're going for shares, you can either pick individual shares or choose a fund where an expert picks them for you.
Beginners in particular might want to consider what we call a 'tracker fund' – a FTSE 100 tracker fund just buys you exposure to the 100 biggest shares in the UK. Job done with one click. Cheap and easy.
Investors can invest in one stocks & shares ISA and one cash ISA each tax year, and can split the £20,000 allowance between them as they see fit.
Choosing an ISA can be like choosing a playlist
You don't need to be a stock market genius – even stuffy old finance is not immune to the digital revolution! This video explains how you can get an online ready-made option quickly and cheaply.
How popular are these things?
What sort of returns are we looking at?
The above chart shows what happened in one 10 year period again. We can't predict with any certainty what the next 10 years will bring. But people take out Stocks & Shares ISAs because the balance of probability is that they will do better than cash over 5 years+. But you do have to mentally prepare yourself for times of paper losses – shares are volatile things.
What are the benefits?
There is really no downside to keeping your investments in an ISA wrapper. Online options today are low-cost and offer good value. They are flexible, so money can be taken out at any time. Investors can put a massive range of shares, funds and investments in them and they allow you to build up a nice income stream, or a lump sum without ever having to trouble the tax man. You don’t even have to put it on your tax return. Easy.
Usually the best account to start investing into
All-in costs should be less than about 1.3% a year
The FTSE 100 in 2017 rose by about 12%, when interest rates were a limp 0.5%. (These have now risen slightly to 0.75% - correct as of August 2018)
But returns can be volatile and not guaranteed
There will be years when it goes backwards
You should be investing for at least 5+ years
I don't know!! Just help me!?
Stuck? Have a look at our Best Buys or read what other investors have to say. We've got easy options for the frazzled beginners or better choices for seasoned market boffins.
Alternatively our factsheets have some more details for you to download and digest.
Download our S&S ISA Factsheet