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Sep 2020

Self Select ISAs: What You Need To Know

Self Select ISAs: What You Need To Know

For experienced investors looking for a more hands-on approach to their investment portfolio, a Self-Select ISA can be a great place to start. But what exactly is it, and how does it work? We’ve put together your guide to all things Self-select ISA so you can make your choice with as much information as possible. 

The majority of people who put their money into a Stocks and Shares ISA are happy to have someone else (an experienced, knowledgeable fund manager) to pick and choose their investments for them. For average investors or new starters, this is the best course of action.

However, for more experienced investors, you may want the option to choose your own investments, funds and bonds. Managing your own portfolio is quite time consuming, however for those who know the market and what they want from their investments, a Self Select ISA is a great way to start.

What is a Self-Select ISA?

A Self Select ISA is specifically designed as an ISA account for those with experience in investment to manage their own investments.

By doing this in an ISA wrapper, you are able to take advantage of the tax benefits afforded for ISAs. You will not be charged tax on any returns you might gain on these investments, and you’ll be able to invest up to £20,000 per tax year.

How does this work?

A self select ISA does what it says on the tin: you can self-select the funds which you want to invest in within your ISA.

You can choose from a number of investments such as:

  1. Unit trusts
  2. Open ended investment companies (OEICs)
  3. Investment trusts
  4. Individual guilts
  5. Equities
  6. Bonds

It should be noted that there are some shares which cannot be invested in within a Self-Select ISA, such as Alternative Investment Market (AIM) shares.

What are the Pros?

There are various upsides to a Self-Select ISA account including…

  1. Like with any other ISA account, your returns will be free from tax, including capital gains tax.
  2. Any dividends are taxed at 10% but by holding them in an ISA you can avoid tax on top of this.
  3. Because you will be the one managing your investments, you will not have to pay a management fee.
  4. You have control over what you want to invest in
  5. You are able to keep a large range of different kinds of funds, bonds and investment types within the ISA wrapper, so with this account there is a lot of scope for diversifying your investment profile.

What are the Cons?

There are a few things to be mindful of before you open one, however, such as…

  1. Having no fund manager does not mean that there are no fees. Make sure you look at which provider you are going with. They could also charge: management fee, fix yearly fee, charges for buying and selling shares, and a dealing fee.
  2. If you are on the basic rate taxpayer, there isn’t a huge amount of tax benefit.
  3. You’ll need to be comfortable with the associated risk

Read more about Self-Select 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.

Lifetime ISAs

Save for your first home and retirement

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Junior ISAs

Invest for your child’s future

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Stocks & Shares ISAs

Invest tax-free in stocks and shares 

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