Stocks and shares ISAs

A stocks and shares ISA is type of investment account where you can put money into a range of investments. If you don’t understand a financial product, get independent financial advice from a regulated financial adviser before you buy.

A stocks and shares ISA could be for you if:

• you aren’t looking for immediate access to your money
• you’re prepared to keep your money invested for a number of years
• you haven’t used up your total ISA allowance for the current tax year
  
• you’re comfortable that the value of your investments can go up and down and you might get back less than you put in.

A stocks and shares ISA is effectively a ’tax wrapper’ that can be put around a wide range of different investment products. Any investment growth or interest earned within a stocks and shares ISA is tax-free.

Lots of different types of investment can be held in an ISA, including:

• unit trusts
• investment trusts
• exchange-traded funds
• individual stocks and shares
• fractional stocks and shares 
• corporate and government bonds
• OEICs (Open Ended Investment Companies).

You’ll often find that stocks and shares ISAs are sold and marketed as products in their own right.

You can pay a total of £20,000 into an ISA each tax year. This limit will remain until 2030.

• You can divide your ISA allowance across the four different types of ISAs: cash, stocks and shares, innovative finance or lifetime. Although the maximum you can put into a lifetime ISA is £4,000 each tax year.
• Your annual ISA allowance expires at the end of the tax year (5 April) and any unused allowance will be lost. It can’t be rolled over to the following year.
• You can make a lump sum investment and/or regular or ad hoc contributions throughout the tax year.
• Any increase in value of the investments in your stocks and shares ISA is free of Capital Gains Tax.
• Most income from your stocks and shares ISA is tax-free.
• It’s worth shopping around to make sure you find an ISA that suits you. Compare any charges for the ISA wrapper and the range of investments you can put inside.

It’s possible to invest in specific companies by buying whole shares.  

With some single shares from companies costing £100s or even £1000s, customers who want to invest in these companies but spend smaller amounts have the option to buy a portion of a single share. This is called a “fractional share”.

You can’t buy fractional shares on the open market. Instead, you need to invest via an investment platform. Not all providers will offer this – so if it’s something you’re interested in, it’s worth checking first. 

Rules from HMRC that came into force on 4 November 2024 mean that any fractional shares you have already bought or buy in the future under the ISA wrapper will be tax free. 

If you’re thinking about investing, make sure you don’t miss our Thinking about investing guide.

If your husband, wife or civil partner dies, you can inherit their ISA. You will receive an additional ISA allowance equal to the value of the deceased’s ISA savings at the time of death.

If you want to switch your ISA to a different provider and keep all the money tax-free, you’ll need to transfer it. You can’t just close it, withdraw the money and reinvest it elsewhere.

Here’s how it works: 

• All ISA providers have to allow transfers out, but they don’t have to allow transfers in.
• You can transfer money from a cash ISA to a stocks and shares ISA, and vice versa.
• You can choose how much you transfer – you don’t have to transfer it all.
• Fractional shares can’t be transferred this way. The only way to change providers is to sell and use the money to invest on another platform. Any gains will be free from capital gains tax – CGT – as it will be coming from an ISA.  

• You can sell the assets held in your ISA at any time and there’s no minimum length of time you need to hold it.
• If you have cash in your ISA, you can only reinvest this money into another ISA, up to your available ISA allowance.

• It’s important to check the charges as these can vary a lot and can impact the amount of money you get back.
• By making sure of the details you can also avoid being overcharged.

If a fund manager goes bust and owes you money – and the manager is covered by the Financial Services Compensation Scheme - you can claim compensation of up to £85,000 per person, per institution.

But you won’t get any compensation just because the value of your investments falls.

You can buy an ISA:

• directly from an ISA provider
• directly through a fund manager
• directly from discount brokers, fund supermarkets or a bank
• from a regulated financial adviser or financial planner
• through an online share account or stockbroker.

Charges might vary for the same product depending on where you buy it, so check and see where it’s cheapest.

If you’re not sure what kind of investments would suit your personal goals and needs, talk to a regulated financial adviser.

Investments that pay interest (like government and corporate bonds), or rental income (like some property funds) provide 100% tax-free income if held within an ISA.

Everyone gets a £500 tax-free Dividend Allowance. This is on top of your personal allowance – the amount you can earn each tax year before paying tax.

Dividends received by pension funds or received on shares within an ISA are tax free and won’t impact your dividend allowance.

Also, any profit you make when selling investments in your stocks and shares ISA is free of Capital Gains Tax.

Any losses made on your investments in your stocks and shares ISAs can’t be used to offset capital gains on your other investments.

See How tax on savings and investments works for more information.

If you’re unhappy with the service you receive or want to make a complaint, start off by contacting your provider or adviser.

Most fund managers and ISA managers are regulated by the Financial Conduct Authority This means that if your complaint is not resolved to your satisfaction, you can take it to the Financial Ombudsman Service