skip to main content
10th
Aug 2020
/

Investment ISA Pros and Cons

Investment ISA Pros and Cons

The tax-free returns offered by an Investment ISA (otherwise known as a Stocks and Shares ISA) can be very tempting at first glance - however, as with any investment, it is important to weigh up the pros and cons. So we've put together a list of what you need to consider before opening your own Stocks and Shares ISA account. 

What’s an Investment ISA?

An Investment ISA - also known as a Stocks and Shares ISA - is a tax-free wrapper for your savings which enable you to earn returns on your investments which are safe from the tax man.

The tax allowance for the tax year 2020/2021 is £20,000 – and it’s never too early to be squirrelling your money away to maximise your tax-free returns.

In order to open an Investment ISA, you must be:

18 or over

a citizen of the UK

So, What are the Pros and Cons?

Talking about the “pros and cons” of an Investment ISA is difficult to narrow down; to a certain extent the pros and cons of opening an Investment ISA will differ on the individual and their circumstances.

However, there are some pros and cons which will apply to most people, which we’ve put together in this blog. 

The Pros:

Tax benefits

  • All types of ISA enjoy tax-free status, meaning that any of the returns that you gain from your investments are kept in a tax-free wrapper. 
  • The government sets a yearly amount which you can put into an ISA account.
  • Within an ISA account, any returns made on these investments will be tax free, so with the right investment you can stand to make quite a bit in returns.
  • With an Investment ISA you can expect: 
  • No capital gains tax on profits which result from an increase in share prices.
  • No tax on bond interest
  • No tax on dividends. 

Plenty of Variety 

Flexibility 

  • Lots of platforms will have flexible options regarding the management of your Investment ISA. 
  • You can either take a DIY approach and manage your investments and funds yourself, or you can pay for a fund manager to use their expertise to manage your investments for you.
  • Depending on your experience and preference, you can choose the management style that suits you best. 

Higher returns 

  • It's well known that the current interest rate is at an all-time low; in fact, interest rates for Cash ISAs and Savings Accounts have been very poor for the past few years. Many people prefer an Investment ISA instead, as these tend to have higher interest rates, meaning higher returns for your money. 

The Cons:

Higher Risk 

  • The stock market can easily go down instead of up; with an Investment ISA, you run the risk of getting less money back than you originally put into the ISA.
  • This is no different to any other investment, so if you're a regular investor then this should not intimidate you - but if you have a low risk tolerance then you may prefer another form of ISA.  

Longer Commitment 

  • Generally speaking, most people with an investment ISA would aim to keep that investment for at least 5 years, in order to account for fluctuations in the stock market. 
  • If you feel that you might need your money in a time frame which is less than five years, then you may be better off choosing a Fixed Term Cash ISA, of which there are lots of different term lengths.  

Access 

  • With most investment ISAs, your money will be locked away for a set period of time. 
  • If you choose to withdraw your money in that period, then it will loose it's tax free status, as well as potentially incurring a penalty from your provider.
  • So, if you believe you might need access to this money sooner rather than later, then an Investment ISA account may not be for you. 

Read more about Investment ISAs.

Investment Fund Supermarket ISAs

Stocks & Shares ISA

from Fidelity

Allows ISA Transfers
  • Protection Scheme: FSCS
  • Fund Choice: 2,000+ Funds
  • Invest From: £50pm

Why we like it: Invest from as little as £50 a month or with a £1,000 lump sum. Investment choice from over 100 fund providers, giving you access to 2,000+ funds. One low-cost service fee of 0.35%*. Great service – from investment guidance on website through to UK-based phones team. PathFinder, Select 50, Investment Finder - investing tools for beginners to advanced investors. 24/7 access via online Account Management system.

* depending on how much you have invested

Special offer:

Invest and get £25 cashback » 

Build your savings with an ISA and receive £25. Exclusions, T&Cs apply.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Vantage Stocks & Shares ISA

from Hargreaves Lansdown

Allows ISA Transfers
  • Protection Scheme: FSCS
  • Fund Choice: 2,500+ Funds
  • Invest From: £25 pm

Why we like it: Shelter up to £20,000 this tax year with the low cost, award-winning ISA. The UK's number 1 platform for private investors. 

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Interative Investor Stocks & Shares ISA

from Interactive Investor

Allows ISA Transfers
  • Protection Scheme: FSCS
  • Fund Choice: 40,000+ UK and global investments
  • Invest From: Any Lump Sum or £25 a month

Why we like it: An award-winning ISA that gives you complete control. The second largest platform in the UK with the widest choice of investment options in the market including funds, investment trusts, ETF’s and more. Open online in less than 10 minutes. Access to expert independent ideas and analysis. Low cost fees and trading.

Important: The value of your investments can rise as well as fall. You may get back less than you invested. If you’re unsure, we recommend you ask for independent advice.

Important Risk Information:

The value of investments can go down in value as well as up, so you could get back less than you invest. It is therefore important that you understand the risks and commitments. This website aims to provide information to help you make your own informed decisions. It does not provide personal advice based on your circumstances. If you are unsure of how suitable an investment is for you, please seek personal advice.

High Income ISAs

High income ISA ideas:

ISAs Products

Cash ISAs

Fixed Rate & Instant Access ISAs:

Cash ISAs: 

Stocks & Shares ISAs

Types of Stocks and Shares ISA include: 

Stocks and Shares ISAs

Latest News

What is a Peer to Peer ISA?

18th September 2020

A Peer to Peer ISA sounds complicated – but to the experienced and keen investor, it can be a great way to diversify your portfolio, try a new, innovative form of investing, while benefiting from the tax benefits associated with an ISA account. But what exactly is a Peer to Peer ISA, and which ones should you be looking at? 

Newsletter Signup

Sign up to our Newsletter to get exclusive news and offers direct to your inbox.

About us

ISA.co.uk is a trading style of Fair Investment Company.

We've been comparing and recommending ISAs for many years so you can trust you're in good hands.

About us

4.74 Average

23 Reviews

Jen

I found the way the different options are presented very clear - much more useful than some other comparison sites. I sent it to my daughter as well.

Paul

Very informative, find myself a good ISA account with best return in terms of interest.

Sue

Easy to use website and up to date. Saved the link on my tablet.

Rob Holden

The website was very useful and informative.

Andrew Johnson

ISA can be confusing at first and this site includes a useful and helpful introduction into the world of ISAs

Crowd2Fund

Excellent website - clear and helpful information about different products - and a trustworthy partner.

Sue

Easy to use website and up to date. Saved the link on my tablet.

Steve

Really simple to use and all the information was clear with lots of products available. The interest calculator was really handy too. Have bookmarked and will definitely use again.

Hannah Gordon

This was a really user-friendly site, and was very helpful when it came to comparing accounts and choosing my 2016 ISA.

Sue

Easy to use website and up to date. Saved the link on my tablet.

Anonymous

If you wish to invest in an ISA this site has it all. A super comprehensive range of simply explained products from all the major companies.

Cristina Iacob

Very knowledgeble company with an extensive range of services, a great website with loads of useful information.

Anonymous

Nice graphics and easy to navigate

Dr Alan Rogan BSc PhD FCIOB FCABE Eur Ing

Good advice and professional approach

Razvan

Very helpful for getting my annual ISA

Jonny Doulton

Clear, concise and very professional outfit with an excellent choice of market leading deals.

Paul Tissington

ISA.co.uk not only helped narrow down my choices for a Junior ISA but also provided additional practical information that helped demystify the whole process.

Sunil Karadia

Just the site I needed, I have been looking for a suitable ISA for a while, but as there are so many to choose from, find it difficult to find the right one for me.

James Weatheritt

I found the information on ISA.co.uk very helpful and easy to understand. The site is easy to navigate and find what you're looking for.

Lisa Holden

I found ISA.co.uk very insightful and easy to navigate through. The content was useful and helped me make my ISA decision.

Neta Pourhosseini

I thought the information provided was easy to understand and very informative, I would recommend to friends for deffinite.