Stocks and Shares ISA Rules
Stocks and Shares ISAs are an easy way for people to begin investing. Many accounts manage your funds for you or provide you with a simple selection so you can choose your own. It’s tax-efficient wrapper which protects your investments from capital gains tax and personal tax.
A Stocks and Shares ISA can be a good way to put aside some money each month or invest some extra money. This kind of account is not advised if you don’t have any other savings or are in debt because you won’t be able to access your money easily if you need to and you could make losses.
However, Stocks and Shares ISAs have the potential to provide better returns than any other savings account.
The Rules of Stocks and Shares ISAs:
- Your annual allowance for a stocks and shares ISA for 2021/2022 is £20,000, but you can only invest with one provider in a single tax year. Investing this amount would use up your full ISA allowance
- If you’d rather split your allowance between a cash ISA and a stocks and shares ISA, you can choose to split your ISA allowance between cash or stocks and shares as you see fit
- The gains you make on your investment are not counted as part of your stocks and shares ISA allowance
- If you sell any shares in your Stocks and Shares ISA, the proceeds can be reinvested within the ISA and will not count towards your annual allowance either
- Everyone over the age of 16 has an ISA allowance, and if you’re over 18 you can have a stocks and shares ISA
- All Stocks and Shares ISAs charge some kind of account fee. Make sure you check before you apply
- You can transfer from a Cash ISA in to a Stocks and Shares ISA and vice versa (usually after selling your investments) Watch out for transfer fees
Investments you can make within the Stocks and Shares ISA wrapper include:
- Individual shares or bonds
- Collective investments, which can be made up of a combination of stocks and shares, bonds, or commercial property, or a mixture of these
What is a Bed & ISA?
It's a term which is used often but what does it mean? Simply, many investors with shares and funds want to save tax on these assets too, Bed & ISA is one way to do exactly that.
Bed & ISA is a term which involves selling your non-ISA investments and then using the proceeds to buy them back immediately but with the ISA wrapper. This means you use your annual tax-free allowance and therefore, save tax on your assets.
What to Consider when Choosing a Stocks and Shares Provider?
- Assess the level of risk you’re willing to take, most providers can filter assets depending on the level of risk you’re willing to take or even provide you with a ready-made portfolio
- Low risk investing tends to focus on bond funds which pay interest or dividends regularly, whereas higher risk portfolios tend to focus on property investment and the stock market
- Providers often hold a limited amount of carefully selected options to invest in whereas others have a much larger range of funds. Work out which is right for you
- Some providers have a simple interface with clear copy about each investment and its past performances. Make sure you find one that you find easy to use, helpful and clear
- Some providers allow you to hold cash in your account, ready to invest whenever you choose. You can even earn interest on that money so make sure your potential provider offers this if you think you may need this option