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Jul 2020

How do Investment ISAs work?

How do Investment ISAs work?

For those looking to make the most of their 2020/2021 ISA allowance, the more attractive rates offered by Investment ISAs are very appealing. So, if you want to put your money into a tax-free wrapper which also gains interest on investments, a Stocks and Shares ISA is the way to go. But how do Investment ISAs work?

What is an Investment ISA, and why should I get one? 

An Investment ISA (also known as a Stocks and Shares ISA)

In fact, the maximum amount you can pay into any kind of ISA account in a year is £20,000.

An Individual Savings Account (ISA) is a tax-efficient way of making your savings work for you in the best way possible. There are lots of different kinds of ISAs, but for the sake of this blog we will be focussing on Investment ISAs (also known as a Stocks and Shares ISA).

For people looking to put their money to work in an investment ISA for the first time, there is a lot to be aware of. So – with that in mind, we’ve put together this blog to give you the rundown of what Investment ISAs are, and how they work.

So…how do they work?

An Investment ISA is generally a more long-term option. Your money will be put to work in an investment (as the name would suggest). You can choose between having an actively managed fund or a passively managed fund, depending on your preference.

Those investments should put your money into various stocks and shares, which should garner returns for you. 

And - because it is an ISA, Government legislation means that any returns earned on your investments are tax-free.

But remember: because it is an investment, the stock market could go down as well as up, so you could end up losing money on your investment. There are some Investment ISAs which are much lower risk than others, but these tend to produce lower yields. It’s important to evaluate your attitude towards risk before opening an Investment ISA.

How much can I put in my Investment ISA? 

The limit you can put into an Investment ISA (or any ISA) is set by the government each tax year. For tax year 2020/2021, this amount is £20,000 per person, per year. 

Also - you can only open one investment ISA per person per year, so it's important to shop around first to make sure you find the right provider and account for you. 

Where Can I get one?

You can get an Investment ISAs from lots of different platforms, including (but not limited to):

  • Banks
  • Building societies
  • Financial Services Companies
  • Credit Unions
  • Friendly societies
  • Peer to peer lending services
  • Crowdfunding companies

Where you open an Investment ISA will depend on your chosen platform – some will have the ability for your to open an ISA online, via phone or by going to a traditional bricks-and-mortar bank. 

What do I need to open an Investment ISA?

Every adult UK Citizen is entitled to opening an investment ISA;

  • Your National Insurance Number
  • Your bank account details
  • You might need a debit card

In order to open a new Stocks and Shares ISA, it needs to be the only ISA of this type you are opening this tax year. This is because legislation limitations mean you are only able to open one Investment ISA per year – but you can pay into existing Investment ISAs or transfer providers.

But – you can mix the type of investments you’ve made within your stocks and shares ISA. You can read more about this in our specific blog “How much can I invest in a Stocks and Shares ISA?”. 

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

Important: Please remember the value of your investment and any income from it may fall as well as rise and is not guaranteed. You may get back less than you invest.

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.

Selected ISAs

FTSE 100 UCITS ETF Tracker

from Vanguard

  • Fund Choice: Tracks FTSE 100 Index
  • Invest From: £25 pm
  • Investment Options: The Fund seeks to track the performance of the FTSE 100 Index.

Available via Hargreaves Lansdown this is a low cost FTSE 100 tracker with a 0.09% pa annual charge.The Fund employs a passive management – or indexing – investment approach, through physical acquisition of securities, and seeks to track the performance of the FTSE 100 Index (the “Index”).

Please note the value of investments can go down as well as up so you may get back less than you invested. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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

Investment ISA Pros and Cons

7th August 2020

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. 

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