skip to main content
9th
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

ISA Option
Allows ISA Transfers
Regular Savings
  • Protection Scheme: FSCS
  • Fund Choice: Choose from over 4,000 investment options, including one of the widest fund ranges in the UK, plus shares, investment trusts and exchange-traded funds. There’s also expert guidance to help with your investment decisions, which includes a selection of tools and insights from Fidelity’s experts. Capital at risk. Tax and ISA rules apply.
  • Invest From: £25 through regular savings or £1,000 lump sum

Why we like it: Fidelity has lots of investment options, plus an extensive range of guidance tools to help you decide what to invest in. Their award-winning ISA is easy to start and offers great value, their a typical service fee of just 0.35%. Other ongoing charges apply. On top of that, everything is backed by Fidelity’s 50 years of investment experience.

Important: The value of investments can go down as well as up so you may get back less than you invest. 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.

Tax treatment depends on individual circumstances and all tax rules may change in the future.

Stocks & Shares ISA

from Hargreaves Lansdown

ISA Option
Allows ISA Transfers
Regular Savings
  • Protection Scheme: FSCS
  • Fund Choice: Choose from over 2,500 funds, shares, investment trusts and more to build your portfolio. UK and overseas shares. Corporate and government bonds. Exchange Traded Funds (ETFs). Ready-made portfolios to suit your goals and attitude to risk from £1,000. Expert research to help make your decisions. Investment trusts and much more. Capital at risk.Tax & ISA rules apply
  • Invest From: £25 pm or from £100 lump sum

Why we like it: Choose your own funds or alternatively a ready made portfolio. Market-beating savings and discounts of up to 5.5%. No charge to buy and sell funds. Low, tiered annual charges for holding funds, with a maximum of just 0.45% per annum. Free fund updates and analysis from experienced research team. Invest with a financially secure, FTSE 100 company.

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 Fund

from Vanguard

ISA Option
Allows ISA Transfers
Regular Savings
  • Fund Choice: Tracks FTSE 100 Index
  • Invest From: £25 pm
  • Investment Options: Provides exposure to the FTSE 100 index of the largest companies listed on the London Stock Exchange at a highly competitive price.

Low cost 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 Index (the “Index”).

Available via:

Hargreaves Lansdown investment platform »

Important: 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

5 Considerations for Your Next Investment ISA

15th March 2021

You've decided to invest your savings into a Stocks and Shares ISA. You'll be using your tax-free ISA allowance for this year before the deadline, while also investing your money for your future. But what do you need to consider before opening an account? We've put together a list of our top five considerations for you to think about before you click "apply". 

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