What are the Stocks and Shares ISA Rules?
Are you looking for a stocks and shares ISA? Wondering which rules you need to be mindful of? We’ve got you covered with our list of the top five rules you need to remember when opening an Investment ISA.
Stocks and Shares ISAs (also known as Investment ISAs) are a great way to invest while protecting your returns from the tax man, by keeping your investments in a tax-free ISA wrapper.
While this all sounds great and shiny – there are some rules you need to consider if you are going to open a Stocks and Shares ISA before the April 6th deadline which marks the end of the tax year.
Luckily, we’ve broken down the top five rules you need to remember when investing in a Stocks and Shares ISA.
1.Remember your ISA allowance
Each tax year, you have a set allowance that you are able to invest in ISAs.
The limit for 2019/2020 is: £20,000 – and as of the recent budget announcement, this is set to remain the same for tax year 2020/2021.
Remember that this tax allowance does not roll over into the next tax year – so if you don’t use your allowance for 2019/2020, it will go un-utilised.
It’s use it or lose it – so if you are going back and fourth about opening an account, you should make that decision before April 6th 2020.
You can invest the whole of your allowance into one Stocks and Shares ISA, or you can diversify your ISA allowance by putting money into other forms of ISA (including Cash ISA, Lifetime ISAs and Peer to Peer ISAs).
2.Only one type of ISA account per year, per person
This rule is very self-explanatory – each individual is able to open one of each type of ISA per year. You can open one ISA and put in all your £20,000 allowance, or open different types of ISAs and spread your allowance between them.
But remember: one account per type, per year, per person.
If you are a parent, you can open a JISA (junior ISA) for your child – the limit for this tax year is £4,368 – but this is set to jump to £9000 in the next tax year (read our recent blog for details).
3.Remember not to transfer yourself
If you open an ISA of one type (like an Investment ISA) and then find a better rate, you can transfer your ISA providers.
The most important point to remember here is that you shouldn’t withdraw your funds yourself; you should instead get in contact with both of your providers and instruct them to make the transfer for you, otherwise your money could lose it’s tax-free status. For more details on this, read our blog which explains the ins and outs.
4.Remember you have options
Within the umbrella of “ISAs” – there are so many options. Even within Cash ISAs, you can choose from multiple options which may or may not suit your needs: Instant Access, Fixed Rate, Structured Cash ISAs etc.
With Stocks and Shares ISAs, the main thing you need to consider is what you want your money to do for you and how involved you want to be: you can opt for a do-it-yourself, or do-it-with-me account type; you can opt for high-risk, or lower-risk options etc.
You can also choose specific accounts which align with your personal values if you choose an Ethical ISA. We’ve written a blog which explains all you need to know about Ethical Stocks and Shares ISAs, so if you’re interested in an account which aligns with your convictions then that’s a good place to start.
5.Remember the risk factor
All stocks and shares ISAs come with a certain amount of risk.
The stock market can go up as well as down, so you could end up with less money than you originally put in.
Depending on what your attitude to risk is, you should examine your options and pick and account which suits you. If you are very risk averse, then a stocks and shares ISA may not be the choice for you – but there are lots different options you can choose from – including Cash ISAs and Lifetime ISAs.