How does a stocks and shares ISA work?
A stocks and shares ISA acts as a tax-efficient ‘wrapper’ for your investments, allowing you invest up to a set amount per year (£15,000 for 2014-15) while paying a reduced amount of tax on any investment income you make. Your personal allowance for a stocks and shares ISA is £15,000 for the 2014-15 tax year. Investing this amount would use up your full ISA allowance, but if you prefer, you can divide your ISA allowance between a cash ISA and a stocks and shares ISA. You could, for example, put some of your allowance in a cash ISA and the remaining balance can be invested in stocks and shares. When considering a stocks and shares ISA, bear in mind that tax treatment may vary and is subject to change in the future.
Can I transfer a stocks and shares ISA to a new provider?
You can switch your investments within the stocks and shares ISA, or transfer your ISA to another provider without it affecting your allowance for that tax year. To transfer a stocks and shares ISA from one provider to another, speak to the new provider, who will arrange it on your behalf.
What do I need to bear in mind when choosing a stocks and shares ISA?
Different stocks and shares ISA providers offer different levels of risk, as well as varying potential returns. Some are focused on specific types of asset, while others are more varied. If you want the opportunity to spread your investments around different areas – and thus avoid putting all your eggs in one basket – you could choose a stocks and shares ISA provider that specialises in diverse portfolio management.
One of the key advantages of a stocks and shares ISA is that it can offer the potential to deliver higher returns than a cash ISA, especially if you plan to hold it over the long term. Holding a stocks and shares ISA for a longer period of time increases your chances of riding out fluctuations in the market. If you’re looking to hold your investment for at least five years, and are happy to take on a level of risk, then a stocks and shares ISA might be a suitable choice for you.
However, stocks and shares ISAs don’t provide the same level of security as cash ISAs. If you’re saving for the short term, need easy access to your money, can’t afford to risk your capital, or are simply risk-averse, then a stocks and shares ISA probably won’t be suitable for you. As with all financial decisions, it’s best to seek independent advice if you’re unsure.
If a stocks and shares ISA isn't the right choice for you, we also provide access to a leading range of cash ISAs: