Money Advice Service

Since July 2014, ISAs (‘New ISAs’) can be used to hold stocks and shares or cash, or any combination of these, up to the current annual limit (£20,000). An ISA is a ‘wrapper’ that can be used to help save you tax. This article looks at Stocks and shares ISAs.

When might a Stocks and shares ISA be for you?

Golden rule

If you don’t understand a financial product, get independent financial advice before you buy.

A Stocks and shares ISA could be for you if:

  • you are happy to put your money into investments but want to protect any profits or interest from tax or to protect dividends from higher-rate and additional-rate tax (as dividends are taxed at 10% – however this provides no benefit to basic rate taxpayers)
  • you aren’t looking for immediate access to your money and are prepared to keep your money invested ideally for a few years, although this will be a personal decision.
  • you haven’t used up your total ISA allowance for the current tax year
  • you’re comfortable with the fact that the value of your investments can go both up and down and that you might get back less than you invested.

What investments are held in Stocks and shares ISAs?

A Stocks and shares ISA is effectively a ’tax wrapper’ that can be put around a wide range of different investment products. It is essentially how different investments held within the ISA are treated for tax purposes. For example, any investment growth or interest earned within the ISA is free of tax.

Lots of different types of investment can be held in an ISA, including:

  • unit trusts
  • investment trusts
  • exchange-traded funds
  • individual stocks and shares
  • corporate and government bonds
  • OEICs (Open Ended Investment Companies).

You’ll often find that Stocks and shares ISAs are sold and marketed as products in their own right.

How Stocks and shares ISAs work

Your allowance is how much you can pay in, not the total value of your investments – so if you put your whole allowance in a Stocks and shares ISA and it falls in value you can’t top it up in the same tax year.

You can pay a total of £20,000 a year into an ISA in the current tax year.

  • You can pay your whole allowance of £20,000 into a Stocks and shares ISA, a Cash ISA, or a combination of these.
  • Your yearly ISA allowance expires at the end of the tax year and any unused allowance will be lost. It can’t be rolled over to the following year.
  • You can choose between making a lump sum investment and/or making regular or ad hoc contributions throughout the tax year.
  • Any increase in value of the investments in your Stocks and shares ISA is free of Capital Gains Tax.
  • Most income is tax-free – find out more in the later section on tax.
  • You can only pay into one Stocks and shares ISA in each tax year, but you can open a new ISA with a different provider each year if you want to. You don’t have to use the same provider for your Cash ISA if you have one.
  • It’s worth shopping around to make sure you find an ISA that suits you. Compare any charges for the ISA wrapper and the range of investments you can put inside.

Use the directory on The Investment Association’s website.

ISA Rules on Deceased Spouse ISA transfers

ISA rules introduced in April 2015 let the surviving partner of a spouse or civil partner who died on or after 3 December 2014, to receive an additional ISA allowance equal to the value of the deceased’s ISA savings at the time of death.

Transferring ISAs

  • Should you wish to switch your current or previous year’s ISA to a different provider’s ISA while simultaneously keeping future tax benefits intact, you have to arrange for a transfer rather than selling and reinvesting.
  • All ISA providers have to allow transfers out, but they don’t have to allow transfers in.
  • You can transfer money from a Cash ISA to a Stocks and shares ISA.
  • If you transfer an ISA that you have paid into during the current tax year to a new provider, you must transfer the whole balance. For ISAs from previous years, you can choose how much to transfer.

Risk and return

  • For most of the investments you would put into a Stocks and shares ISA, the value can go can go down as well as up and you might get back less than you invested.
  • The level of risk in your Stocks and shares ISA will depend on the investments you choose to put into it.

Access to your money

  • You can sell the assets held in your ISA at any time and there is no minimum length of time you need to hold it.
  • If you do cash in some or all of your ISA, you can only reinvest this money into another ISA to the extent that you have unused available ISA allowances.


  • Make sure you check the charges on the underlying investment as these can vary a lot. By making sure of the details you can avoid being overcharged.

Safe and secure?

If a fund manager goes bust and owes you money – and the manager is covered by the Financial Services Compensation Scheme - you can claim compensation of up to £50,000 per person, per institution.

However, you won’t get any compensation just because the value of your investments falls.

How to buy

You can buy an ISA:

  • directly from an ISA provider
  • directly through a fund manager
  • directly from discount brokers, fund supermarkets or a bank
  • from an independent financial adviser or financial planner
  • through an online share account or stockbroker.

Charges might vary for the same product depending on where you buy it, so check and see where it’s cheapest.

If you’re not sure what kind of investments would suit your personal goals and needs, talk to an independent financial adviser (IFA).


Investments that pay interest (e.g. government and corporate bonds), or rental income (such as some property funds) provide 100% tax-free income if held within an ISA and therefore offer tax benefits for everyone.

As of April 2018, all individuals are eligible for a £2,000 tax-free Dividend Allowance.

Dividends received by pension funds or received on shares within an ISA will remain tax free and won’t impact your dividend allowance.

Also, any profit you make when selling investments in your Stocks and shares ISA is free of Capital Gains Tax.

Any losses made on your investments in your Stocks and shares ISAs can’t be used to offset capital gains on your other investments.

If things go wrong

If you are unhappy with the service you receive or want to make a complaint, start off by contacting your provider or your advisor.

Most fund managers and ISA managers are regulated by the Financial Conduct Authority so if your complaint is not resolved, then you can contact the Financial Ombudsman.

This article is provided by the Money Advice Service.