Around the start of a new tax year, everyone goes a little crazy for stocks and shares
ISAs.
Whether you’re looking for a tax-efficient way to store your savings and investments
or just want to learn more about what the hell they are, this video will take you through
the stocks and shares ISA essentials, how they work, if it’s right for you and how
much they could set you back.
A stocks and shares individual savings account, or ISA, is a type of account that lets you
invest your savings in the stock market.
What sets an ISA apart from a regular savings account is that any profits or interest you
make from the funds in your account won’t be taxed.
So a stocks and shares ISA can be a great way to maximise your investments as they act
as a sort of, totally legal, invisibility cloak from the tax man.
Every year you’ll get an allowance for how much money you can deposit into your ISA.
And this will renew every tax year, which, in the UK, goes from the 6 April to 5 April
the following year.
For the 2022/2023 tax year, the ISA allowance is £20,000.
To open an ISA you have to be 18 or older and a UK tax resident.
You can only pay into one stocks and shares ISA per tax year, however, you can pay into
several different types of ISAs, cash or lifetime ISAs for example, per tax year.
Your £20,000 yearly allowance will be spread across your different ISAs, so you can’t
pay 20 grand into each.
Which can be pretty frustrating if you’re one of those people who have more than £20,000
hanging around in your savings!
All stocks and shares ISAs follow the same principle: you pay in money up to £20,000
a year, that money is invested in the stock market, any profits or interest you make or
any dividend income are tax-free.
Outside of an ISA you’d have to start paying capital gains tax on your investment profits
once you hit the threshold of £12,300 and only your first £2,000 of dividend income
would be tax free.
There are several ways you can choose to invest your money.
If you want to be very hands on with your investments, opt for an ISA that lets you
invest in individual companies like Greggs or Barclays, or otherwise manage your investments
yourself.
If you want your ISA to sort of tick away in the background, go for a robo-advisor or
managed portfolio.
With these types of accounts you can choose the amount of risk you take on and might choose
which sector you want to invest in or how ethical your investments are, but otherwise
you leave the core management of your funds up to the company.
A third option is to go for a mix of both.
You can open a stocks and shares ISA with a broker or share trading app like Freetrade,
for example, or via a personal finance money app like Moneybox, which might also offer
additional savings accounts like a lifetime or cash ISA.
When thinking about the right investment style and platform for you, ask yourself: Do you
want to invest in individual stocks or ready-made portfolios?
How much do you want to invest, as some providers have a minimum deposit amount?
Are you interested in a range of accounts or insight tools or do you just want a straight
down the line stocks and shares ISA?
Do you want a platform with educational features to help you learn as you go?
The answers to these questions will help inform which stocks and shares ISA is the right one
for you, check out some of the links in the description below to start comparing providers.
Your personal investment goals will largely determine the answer to this question.
But, in general, a stocks and shares ISA could be a great option for someone who’s looking
to put money aside each month, and are happy to invest over the long-term as this will
typically lead to higher gains.
You can withdraw your money at any point, but if you then want to reinvest it in your
ISA, it will count as part of your annual allowance.
You can transfer your ISA from one provider to another, as long as you follow the transfer
procedure of the provider you’ve chosen.
If you have lots of debt, you should look at ways to clear that first before investing
your cash elsewhere.
If you want super easy access to your money in the short-term, a current account or easy
access savings account might be a better option for you.
A stocks and shares ISA is way more risky than a regular savings account, but that added
risk means added reward and you could potentially get more out of your savings with a stocks
and shares ISA.
When the new tax year comes around there can be a lot of buzz around ISAs.
But unless you’re maxing out your £20,000 allowance each year, or think you’ll max
it out next year, try and ride out the hype and just stick to your goals, as unless you’re
looking to change your ISA or portfolio style, typically, not much changes year-to-year.
These days, a lot of stocks and shares ISAs will be free to open and set-up.
But there are a number of fees to look out for, including:
A monthly or annual brokerage or platform fee
Fund or share trading fees
Fees to withdraw money from your account
And fees to manage your account if you go for a managed portfolio
Your investment goals, which I mentioned earlier, will not only help to determine which platform
and investment style is right for you, but also what sort of fees you’re willing to
pay to lock those down.
For more information on stocks and shares ISAs and to start comparing the right one
for you, visit finder.com by clicking this link here.
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Thanks for watching.