Stocks & Shares ISAs - Investment ISAs | moneyfacts.co.uk

Stocks and Shares ISAs / Investment ISAs

  - Often referred to as Investment ISAs, Stocks & Shares ISAs can offer a tax-efficient investment opportunity for your ISA allowance.
 

If you're looking for a tax-efficient savings vehicle and are comfortable with an element of investment risk, a stocks and shares ISA could be for you. It's essentially a tax-efficient wrapper for your savings, but rather than keeping it in cash, your money is invested in the stock market; because you’re investing in stocks and shares the risks are far higher, but there’s also the potential to secure far better returns.

Investec Stocks and Shares ISA
Virgin Money
Account Type
Investment ISA
Min. Investment
£10,000
Funds available: 5 portfolios

Further information...
With a Click & Invest Stocks & Shares ISA you'll get an actively managed online investment portfolio that is specific to you and your investment goals. Our specialist Investment Managers and in-house Research Teams will create and continuously manage your investment portfolio so you don't have to. We are part of Investec Wealth & Investment, who have over 180 years of experience in managing client investments.
All investment carries risk and you may get back less than you invested.

Virgin Money Stocks and Shares ISA
Virgin Money
Account Type
Investment ISA
Min. Investment
£1 or £1/month
Funds available: 5 funds

Further information...
Virgin Money's passively managed range offers a choice of five funds. Each with a different level of risk and potential reward so you can choose the fund(s) that best meet your needs. Generally, the more risk you are prepared to take with your money the greater the potential reward. There is an annual ongoing charge of 1% of the value of your fund - no other charges.

Remember, the value of your investment can go down as well as up and you may get back less than you invest.

Moneyfarm Stocks and Shares ISA
Moneyfarm
Account Type
Investment ISA
Min. Investment
£1
Funds available: 12 portfolios

Further information...
A Moneyfarm Stocks and Shares ISA offers a personalised, hassle-free, tax-free investment solution. Moneyfarm crafts a portfolio suited to your investor profile and risk tolerance, then fully manages it on your behalf, so you don't have to. Whilst there is no minimum investment, it is recommended to start with £1,500 or more to get a fully diversified portfolio. There is one low management fee ranges from 0.4% to 0.7%, plus the underlying cost of the investments. Regulated by the FCA and protected by the FSCS. Your capital is at risk.

£20,000 managed free of charge for 1 year with code MFACT20K.

Nutmeg Stocks and Shares ISA
nutmeg
Account Type
Investment ISA
Min. Investment
£500
Funds available: 10 managed and 5 fixed allocation portfolios

Further information...
Get an intelligent stocks & shares ISA portfolio. Choose a portfolio that's fully managed by our expert team, or one designed to remain steady and re-balance automatically. No tie-ins, no set-up fees, no exit charges. Easy, online set up in minutes. Start with as little as £500 (plus £100 per month for ISAs below £5,000). Simple fee structures - 0.25% to 0.75% depending on how much you invest, incl VAT. Plus live chat, amazing customer support and brilliant investor tools and guides. Regulated by the FCA and protected by the FSCS. Capital at risk.

One Family Junior ISA
One Family
Account Type
Junior ISA
Min. Investment
£10 per month
Funds available: 2 funds

Further information...
The OneFamily Junior ISA helps you to invest for your child's future. It could help towards going to uni, driving lessons or perhaps helping to pay for a flat of their own.

It's designed to be a long term children's investment. You invest for your child's future, and only the child can take the money out and only once they're 18. Because it invests in stocks and shares, the Junior ISAs value can fall as well as rise, so your child could get back less than has been paid in.

Open your child's Junior ISA online and set up a Direct Debit and as a thank you OneFamily will send you up to £50 in e-vouchers (gift terms and conditions apply - please see OneFamily website).

Halifax Investment ISA
Halifax Stocks and shares
Account Type
Investment ISA
Min. Investment
£2,000 or £100/month
Funds available: 3 funds

Further information...
Our Investment ISA is a Stocks & Shares ISA, and has the potential to provide better returns than a savings account. We have three Managed Funds to choose from which invest in a wide variety of non-cash assets on your behalf. Our Investment ISA is a tax-efficient way to make your savings work harder. Capital at risk. Apply now!

Hargreaves Stocks and Shares ISA
Hargreaves Lansdown Stocks and Shares
Account Type
Investment ISA
Min. Investment
£100 or £25/month
Funds available: 2,500 funds

Further information...
The Hargreaves Stocks and Shares ISA has no dealing charges for funds, plus a low cost reinvestment service. There are super low annual charges on a range of leading funds, exclusive low charges on leading tracker funds and low annual account charge for funds of just 0.45%

94% of our clients rate our service as good, very good or excellent. (Survey in September, 2014 9,371 respondents)

Scottish Friendly My MoneyBuilder (ISA)
Scottish Friendly
Account Type
Investment ISA
Min. Investment
£10/month

Further information...
Put a little money aside for you. Start from £10 a month. Get £50 cashback when you pay in at least £50. Capital at risk. £50 exit fee applies within the first 5 years.

Scottish Friendly My UK Tracker Options (ISA)
Scottish Friendly
Account Type
Investment ISA
Min. Investment
£10/month

Further information...
A very British investment in the UK stock market from just £10 a month. Get £50 cashback when you pay in at least £50. Capital at risk. £50 early exit fee applies.

Scottish Friendly My Select (ISA)
Scottish Friendly
Account Type
Investment ISA
Min. Investment
£10/month

Further information...

Start investing for your future from £10 a month. Choose from a range of funds to suit your investment goals. Get £50 cashback when you pay in at least £50. Capital at risk. £50 early exit fee applies within the first 5 years.
Scottish Friendly My Select (Junior ISA)
Scottish Friendly
Account Type
Investment ISA
Min. Investment
£10/month

Further information...
Start investing for your child's future today. Open a Junior ISA from £10 a month. Get £50 cashback when you pay in at least £50. Capital at risk. £50 early exit fee applies within the first 5 years.

The list of ISAs given above is not an outline of the best investment funds or a whole of market overview, but it gives you an idea of the kind of options available. You can find out more about the individual products by heading to any of the providers listed (moneyfacts.co.uk will be paid an introduction fee if you go on to invest). Remember that these are non-advised services, so if you're unsure, please seek investment advice.

What is a stocks & shares ISA?

A stocks and shares ISA, otherwise known as an equity or investment ISA, is a way of investing in shares and a wide range of funds on the stock market while retaining the tax-efficient element of a traditional cash ISA. The money held is exempt from tax, unlike when you’re investing directly into funds or shares outside of an ISA, where income and capital gains tax may be paid either by you, or within the fund itself by the fund manager.

This kind of ISA will actively invest your money across your choice of funds in the stock market. The majority of such accounts use collective investment funds, such as Unit Trusts or Open Ended Investment Companies (OEICs), and investors can either receive a form of income during the term of their investment or wait until they cash in their pot.

Different types of stocks and shares ISAs

Stocks and shares ISAs can comprise of:

  • Corporate bonds. You ‘lend’ your money to a corporate entity in return for interest.
  • Government bonds. As above, except you’re lending money to a government.
  • Shares. You invest in an individual company, and if the value of that company goes up, so does the value of your share (and vice versa).
  • Funds. These can include a range of entities, often covering bonds, shares and even cash, allowing you to diversify your investments without needing to engage in individual stock trading. Funds typically have a set theme (such as a particular geographical location or industry) and investments are made accordingly. Most stocks and shares ISAs are based on funds.

Funds will typically be set up as Unit Trusts (which are set up in trust form, meaning it’s a separate entity from the fund manager’s company; when you invest you get ‘units’ of that trust), OEICs (investment funds that are set up using company law as a separate entity from the fund manager’s own company; when you invest you get a specified number of shares) or even life insurance funds.

In many cases, you’ll be choosing your stocks and shares ISA – and by default, your funds, bonds or shares, etc. – through a platform, which is essentially a ‘fund supermarket’. You first need to decide on the platform (or provider) you want to use before deciding on the funds you want to invest in.

This decision can be based on many things, such as the minimum investment, the fees, the range of investments or the amount of flexibility it offers you in managing your funds – there is no such thing as the best investment isa, only the one that works best for you. Don’t hesitate to seek advice if you’re not sure what you are looking for.

2017/18 ISA allowance

Stocks and shares ISAs come with the same annual allowance as their cash counterparts, which means you can invest up to £20,000 in the 2017/18 tax year. The same rules apply, too: you can only contribute to one investment ISA in any tax year, but you can split the £20,000 allowance between different kinds of ISA as you see fit, and if you don’t use it, you lose it.

The allowance can’t be carried forward to the next tax year, so if you’ve got money to invest, it’s worth doing so sooner rather than later. That way, you can benefit from compounding, too – which means your investments can grow on top of the growth you’ve already received, as well as your initial investment, and the effect can snowball thereafter.

ISA transfers

It’s worth pointing out that, although you can only have one active investment ISA per tax year and can only invest £20,000 in ‘new’ money, there’s nothing to stop you from moving previous years’ savings between different accounts. This won’t count towards your annual allowance, so you can move money around from previous years and still make new contributions, and there’s no limit to the number of stocks and shares ISAs you can accumulate over the years.

There are several reasons you may want to move investment ISA funds from one account to another. You may have calculated that you’ll be better off with a different provider that offers lower fees, or perhaps one that has a wider investment choice with more share trading opportunities. You may simply be unhappy with your current provider and want better value and enhanced customer service – in any of these scenarios, you’ll want to compare investment ISAs to scout out the best investment funds, and potentially move your money over.

However, there’s a special process you’ll need to follow if you want to retain the tax-efficiency of your already invested funds – don’t simply sell the shares, withdraw the proceeds and start from scratch – and there are a couple of routes you can go down.

  • In-specie transfers. This involves a stock transfer whereby all the investments you hold, and all the funds you’re invested in, are transported to your new provider with you staying invested throughout the process. This type of transfer is ideal for those who are happy with their investments and don’t want to make any changes or get involved in new stock trading, but because you’re still invested, the process can take longer (typically four to six weeks). There may also be exit fees to pay, which you should always look at when comparing the best investment ISA funds.
  • Cash transfers. This option involves you selling your investments and the proceeds being sent to your new provider, effectively allowing you to start the process over and begin investing in shares from scratch. Despite this, the tax-free status of your money remains intact, and your new provider will reinvest those funds according to your instructions. It’s generally a quicker process, but as you’re not invested you could miss out on gains from your previous investment, so it will depend on your goals.

There’s also the option to transfer funds held within a cash ISA into a stocks and shares version, and likewise, you can transfer your stocks and shares ISA into the security of cash should you wish. Again, there’s a set process to follow with each, and you’ll need to contact your new provider and fill in a transfer form to retain your money’s tax-free status.

Is investing a good idea?

This question all comes down to your personal circumstances and your attitude to risk. Investing in stocks may not be entirely safe, but it can be ideal for those who can afford to lose some of their cash if the market doesn’t perform as well as was hoped, as for some, the trade-off of potentially far higher returns could be worth it.

After all, investments have a far higher chance of beating inflation over the long term. The best performing stocks and shares ISA certainly looks far more appealing than the top cash alternative, but again, there are risks, so you’ll need to weigh up the facts, and past performance is no guarantee of what the fund might achieve in the future.

Should I consider both kinds of ISA?

This depends on your attitude to risk, and the phrase “don’t put all your eggs in one basket” is particularly worth remembering. Cash ISAs will be preferable for those who don’t want to take any risk whatsoever with their money, and would instead prefer the security of capital protection and a guaranteed return.

Stocks and shares ISAs, on the other hand, could be ideal for those who can afford to take more of a risk with their money and are comfortable with taking a long-term view, with their key objective being long-term growth (or income, depending on the type of account chosen). Of course, you’ll want to keep a certain amount of cash savings accessible at all times – either in an easy access cash ISA or traditional savings account – but if you’ve got a suitable financial buffer and want the potential of greater returns, a stocks and shares ISA could be worth considering.

Fees and charges

Our stocks and shares ISA list above allows you to choose from several platforms and fund managers, most of which have a range of funds you can invest in thereafter. It’s worth pointing out that you’ll typically be charged both for using the platform and for buying the funds – investing in stocks and shares always comes with associated fees – so make sure to consider both when comparing accounts.

Once invested, the returns you receive from your stocks and shares ISA will be linked to the performance of funds, stock markets or specific shares, depending on the type of account you choose, and the profit you receive will be based on that performance. However, this is where the risk comes in – the value of your investments can fall as well as rise and your capital isn't guaranteed, so like with any form of share trading, you may get back less than you put in.

Whichever stocks and shares ISA you choose, you will need to make sure that the entities you invest in meet your objectives and you are comfortable with the level of risk involved. You should regularly review the performance of your chosen funds to ensure they are suitable for you over the longer term.

What's the difference between a cash ISA and an investment ISA?

The key difference between cash ISAs and investment ISAs is that the cash version holds onto your cash and pays interest at a set rate – either variable or fixed, the latter guaranteeing your eventual returns if you invest a lump sum – with your capital not being subject to investment risk. Interest will be paid entirely tax-free, and even when interest rates are low, you can be safe in the knowledge that you won’t lose your initial deposit.

In contrast to a cash ISA, stocks and shares ISAs actively invest your money into external funds or company shares for the potential of bigger returns – you’re actively buying and selling shares, either personally or through a managed portfolio. An investment ISA is not a savings account, and should be viewed purely as an investment product.

It’s far more complex than a cash version – there are several different products you can choose from and funds you can invest in depending on your goals, with the key decision being whether you want to generate an income (in which case you’d choose income generating funds, denoted by the term “Inc”) or grow your initial investment (whereby you'd need accumulation funds, denoted by the term “Acc”).

You need to make sure you're comfortable with the level of risk involved, as well as the long-term nature of equity ISAs – investing in shares requires a long-term view, which means you should be willing to keep your money invested for several years (while most funds can be sold at relatively short notice, this type of account won't be good for those who may need to dip into their savings in an emergency, so make sure you view it as a longer-term undertaking).

This offers the best scenario for growth and will give you the chance to weather any fluctuations in the stock market, and hopefully secure a profit at the end of it. But there’s no guarantee – a stock and shares ISA is a higher-risk home for your money, with the returns based on the performance of the specific funds, so there's a chance you could lose some or all of your initial investment, potentially leaving you with less than you put in.

Past performance should never be seen as an indicator of future returns, so even if you pick the best performing stocks and shares ISA funds, you can’t guarantee that the same performance will continue. This means that, despite the potential to secure better returns than with a traditional savings account, it's important to be prepared that you may end up worse off. There are different rules regarding FSCS protection, too – while ISA investments are covered by the FSCS, they will only be covered up to £50,000 instead of the £85,000 that cash ISA savers benefit from.

You’ll also want to remember that, even though your investments will essentially be held in a tax-free account, there could still be certain tax payments and fund charges applicable. Investment ISAs are exempt from income and capital gains tax, while the taxation of dividends changed in April 2016, so that dividends are also paid free of tax if held within an ISA. However, these ISAs will usually charge fees, particularly when you’re actively stock trading, so always check the small print to see if the particular account is worth it. There may not be a single best investment ISA, but if you carefully compare stocks and shares ISAs, you should be able to find the best stocks and shares ISA for your requirements.

Understand the risks

This really can’t be reiterated enough – before you start stock or share trading through an investment ISA, you need to be fully aware of the risks involved, and more importantly, you need to be comfortable with those risks.

  • Any investment comes with an element of risk, particularly those with the prospect of higher returns, and this is certainly the case with stocks and shares ISAs. Over time there could well be fluctuations in the value of an investment, with the total value and any income generated going down as well as up, and in a volatile market some investors may get back less than they put in.
  • Different types of investment funds have different levels of risk - or to put it another way, they will be more volatile. For example, funds investing in smaller companies or emerging markets will be more volatile than funds that invest in UK blue chip firms. Also, growth funds investing in shares are likely to be more volatile than funds investing in fixed interest investments such as Government gilts or corporate bonds.
  • It is usually a good idea to invest across a range of investment types (or asset classes) such as shares, bonds, property and cash to spread your risk. How much you invest in each category will depend on how much risk you are prepared to take, and how long you intend to invest for. Whatever you choose, remember that past performance should never be seen as an indicator of future returns – even the best performing stocks and shares ISA can disappoint.

Ultimately, remember that this kind of account will always be riskier than a cash ISA, and it should be viewed as a long-term investment to counter the risks of stock market volatility. Tax advantages will depend on your circumstances and may change in the future.

Stocks and shares, like their cash ISA counterparts, are regulated by the Financial Conduct Authority, which means that investing in a stocks and shares ISA should not come with the risk of the ISA provider running off with your funds. The risk therefore comes solely from the nature of investing in the stock market, with between £50,000 and £85,000 protected (per person, per institution thanks to the FSCS) should the provider go bust.

What next?

See above for a selection of the best investment funds and stocks and shares ISAs Want more security? Consider a cash ISA instead

Disclaimer: This is a basic guide to stocks & shares ISAs. It does not cover every circumstance and nor is it intended to be a source of advice. This information is aimed at customers within the UK. Tax treatment depends on your individual circumstances and may be subject to change.

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