How Stocks & Shares ISAs Work
- Stocks & Shares ISAs allow you to invest tax-free into businesses, commodities, funds, and more
- Investing in a Stocks & Shares ISA is as simple as opening an account with a broker and choosing which shares or funds you’d like to buy
- You can now use multiple Stocks & Shares ISAs (no more ‘one per year’ limit)
- There’s a £20,000 annual deposit limit and other ISA rules apply
Financial Interest was founded by Damien Talks Money (220,000 YouTube subscribers) to teach the personal finance lessons he wished he'd been taught at school.
Last updated 22nd April 2024
If you’re looking to invest in stocks, index funds or ETFs, bonds, or anything remotely similar to these things, there is one main benefit of choosing to invest inside a Stocks and Shares ISA: you don’t pay any tax on returns from your investments.
It doesn’t matter if you get paid thousands in dividends from the companies you’ve invested in or if the value of your purchases increase by 10,000%; the gains you make will be tax free as long as you stay within your annual ISA allowances.
If you invest outside of an ISA, you’ll owe capital gains tax on your profits, which can add up to huge amounts over time.
And whilst the world of investing and ISAs can seem confusing, it’s actually really simple to get started.
If you want to open a Stocks and Shares ISA, you’ll need to find a broker that allows you to do so. This process only takes a few clicks.
Many popular investment platforms don’t offer their own ISA – examples of this are eToro and Robinhood but there are certainly many more – so just be careful as this can cost you significantly in the long run.
Once you’ve created your account with a broker that offers an ISA, then gone through their registration process, you’ll need to confirm with them that you are in a comfortable position to be investing using their services.
There’ll be a range of questions that you need to complete and information that you need to provide, but after you’ve done so, you should now have the option of opening an ISA.
To be clear: with most brokers you open and verify your account first, then open a Stocks & Shares ISA within your broker account.
It is a different process for each platform, but it’s all the same thing really.
After opening your ISA, link your bank or add your card, and you should be able to deposit right away.
You can then begin investing in shares, index funds, ETFs, commodities, bonds and more.
It can seem overwhelming for a lot of people but if you’ve bought things online before, and especially if you’ve used an investing app or a crypto exchange before, all of this will feel very familiar.
Limits
In the UK, as of the 6th April 2024, you can now deposit into as many Stocks and Shares ISAs as you like each year – but you do have an annual limit of £20,000 invested across all types of ISA.
As an example, I could have four different Stocks and Shares ISAs with different brokers and if I deposited £5,000 into all of them within the year, I’d still be within the limit.
However, I wouldn’t then be able to deposit £1,000 into a Cash ISA because of the overall £20,000 deposit restriction.
Before the 6th of April 2024, you were only able to contribute to one Stocks and Shares ISA per year, which was much more limiting, but now we have more freedom to experiment with where we invest.
If you reach your annual investment limit, you just have to wait for the next financial year which runs from April 6th to April 5th.
You can continue investing outside of an ISA but you’ll pay tax on any gains made.
There are other ISA limits that you should be aware of too, but they’re all nice and simple. You should look into these limits if you also wish to use Cash ISAs, Lifetime ISAs, Innovative Finance ISAs, and save in Junior ISAs on behalf of your children.
Financial Interest was founded by Damien Talks Money (220,000 YouTube subscribers) to teach the personal finance lessons he wished he'd been taught at school.