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Mar 2020

What are High Income Stocks and Shares ISAs?

What are High Income Stocks and Shares ISAs?

Do you want to open an Investment ISA with the highest possible yield, paid as regular income? Are you a fairly experienced investor familiar and comfortable with the risks associated with investment ISAs? Then a High Income fund ISA might be right for you. 

What is a High Income ISA?

A high income ISA, or a High Yield income fund ISA, is a way of utilizing your ISA allowance which is aimed a providing you high-yield income in a tax-efficient wrapper. You’ll be paid ‘income’ on a regular basis, which will be dictated by the type of account/fund you have chosen. Because it’s an ISA, this income will be tax-free.

For these funds, fund managers will usually invest in lower grade bonds which are provided by companies which have a higher risk of default – which will resultantly gain a higher yield.

This offers far higher yields in terms of returns than your standard Cash Savings Accounts, so for a saver who is up dealing with the investment-associated risks, this is a great option to garner high returns. 

When is income paid?

This depends on the account and the fund, but usually income is paid on a quarterly, semi-annual or annual basis. Bear this in mind when choosing your account, so you can choose the right option for you and your savings goals.

What does it offer?

Investing in a high yield income fund ISA can offer…

  1. Regular income
  2. Diversification
  3. Potential for capital growth
  4. Fund manager expertise

What is the High Income ISA Limit?

The ISA limit for 2019/2020 is £20,000.

Assuming you have this cash to spare, you can choose to put all of this into a Cash ISA or an investment ISA – so when it comes to high income ISA funds, you can theoretically put in your whole £20,000 allowance.

What are the benefits? 

For the right kind of saver, there are lots of benefits to having a high income fund ISA, including: 

  1. A high income ISA offers much higher returns – especially in a market where current interest rates are so low.
  2. If you’re saving long-term, such as for your retirement, then you might consider this as a way to generate future ‘income’ once you’re retired.
  3. There is a lot of diversity in the type of funds you can invest in, so you can use these really effectively to diversify your investment portfolio.

Is it risky?

In a word – yes, but no more so than other investment ISAs. No Investment ISA is 100% safe, and there are risks associated with investment ISAs as with any other investment. Nothing is guaranteed.

Should the market fall, you could end up getting less money back than you originally invested. 

If you have an investment with a company which fails, you might be eligible to claim through the Financial Services Compensation Scheme (FSCS) which covers each person up to £85,000. 

Read more on High Yield Income Fund ISAs.

Read more on Stocks and Shares ISAs. 

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.

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