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Stocks and Shares ISA Explained

Stocks & Shares ISA

Stocks and Shares ISA explained

Find out more about the rules and benefits of our tax-efficient Stocks and Shares ISA

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What is a Stocks and Shares ISA?

A Stocks and Shares ISA is a tax-efficient savings account where you invest on your terms and choose where your money is invested. This includes shares, funds and bonds. You can invest up to £20,000 a year, in one ISA or a mixture of different ISAs. 

Who can open a Stocks and Shares ISA?

You can open a Stocks and Shares ISA if you are a UK resident aged 18 or over. Stocks and Shares ISAs are generally suitable for individuals who are confident making their own investment decisions. Other forms of tax-free savings accounts include the Cash ISA, Lifetime ISA, Innovative Finance ISA and Junior ISA. 

How much can I invest in a Stocks and Shares ISA? 

The Stocks and Shares ISA allowance for 2020-21 is £20,000. The ISA limit applies to all accounts you may hold. For example, if you have a Stocks and Shares ISA and a Cash ISA, the £20,000 allowance is the total you can invest across both accounts. 

What is the deadline for opening an ISA?

The deadline for investing in an ISA this tax year is 5 April 2021. You can invest at any point up to that date. 

What are the Stocks and Shares ISA tax benefits?

Stocks and Shares ISAs have numerous tax advantages. Like the Cash ISA, the Stocks and Shares ISA is exempt from tax on interest. Plus, Stocks and Shares ISA tax rules mean you will not pay capital gains tax on your investments if they increase in value, or on most of the dividends you receive (dividends on international stocks may be subject to withholding tax). Interest from government or corporate bonds is also free from further tax. 

How many ISAs can I have? 

You can split your allowance between four types of ISA, in any proportion, but you can only contribute money to one of each type of ISA in the same tax year. For example, you can open a Cash ISA, a Stocks and Shares ISA and an Innovative ISA in the same tax year, but not two Stocks and Shares ISAs. 

What can I hold in a Stocks and Shares ISA?

You can hold a wide range of investments within your Stocks and Shares ISA and receive tax benefits. The most common investment types include:

By opening an ii Stocks and Shares ISA, you will be able to pick from more than 40,000 investment options to build your ISA portfolio. We offer a range of tools, filters, articles and rated lists to help you choose the best for you. 

Can I withdraw money from a Stocks and Shares ISA? 

You can withdraw money from your ISA into an account held in your name but we do not offer ISA flexibility. That means if you take cash out of your ISA, it will lose its tax-efficient status and you will not be able to replace that amount in the same tax year. 

To withdraw money, log in to your account and from the menu select cash & transfers > withdraw/transfer cash and follow the instructions on screen for a bank transfer

The timescale for withdrawing cash is the next working day if you make the withdrawal before 2pm, and two business days if you make the withdrawal after 2pm. If you are selling shares, you will not be able to withdraw the funds until after the trade has settled. 

Can I contribute to an ISA for someone else? 

You can contribute to a Junior ISA, while couples can enjoy a combined annual allowance of £40,000 (£20,000 each). A Junior ISA has to be opened by a parent or guardian, but after that anyone can contribute - great news for grandparents who may want to give their grandkids a financial head start. 

What happens to my ISA if I die? 

When you die, your ISA forms part of your estate, and will be subject to inheritance tax like any other asset. It will remain open until either the administration of the estate is completed, or it is closed by the executor. If neither of these things occurs, it will be closed three years after your death. 

You can leave your ISA to whoever you choose in your will. If you have a Stocks and Shares ISA, the investments can be transferred to your beneficiary, or they can be sold and the proceeds paid to the beneficiary. 

Your spouse or civil partner can inherit a one-off additional ISA allowance, equal to the value of the deceased's ISA account. This is known as Additional Permitted Subscription (APS). 

What is Additional Permitted Subscription (APS)?

When you die, your spouse or civil partner inherits a one-off additional ISA allowance. The allowance is equal to the value of your ISA on the day it closes, or the day you died, whichever is higher. This value is added on to the normal ISA allowance of £20,000. The remaining spouse or civil partner can claim APS even if the ISA has been left for someone else in the deceased's will. Find out more about Additional Permitted Subscription

When can I transfer my ISA? 

You can transfer your ISA at any time, and it will not affect your annual allowance. If you want to change providers, it is important to do this as a formal transfer process. If you withdraw money from an ISA in order to set up a new one, the money will be deducted from your allowance for the year. 

The main rules for transferring a Stocks and Shares ISA are:

  • If your ISA has been opened in the current tax year, you must transfer the full amount you have contributed
  • If you are transferring ISAs from previous years, you can transfer any amount and it will not affect your annual allowance
  • You can transfer a Cash ISA into a Stocks and Shares ISA and vice versa
  • You can transfer your Stocks and Shares ISA without having to sell your existing holdings (called an in-specie transfer)

How long will it take to transfer my Stocks and Shares ISA?

The process for transferring a Stocks and Shares ISA should take no more than 30 days. You should be aware that if you decide to sell any holdings before you transfer there may be charges for selling your investments prior to transferring, and some providers may charge an exit fee. 

Invest for a better future with a great value, tax-efficient stocks and shares ISA. Start today for only £9.99 a month.

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Please remember, the value of your investments may go down as well as up and you may not get back all the money that you invest. If you're in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. Please note, the tax treatment of this product depends on the individual circumstances of each customer and may be subject to change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.
Capital at risk. All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed. There is no guarantee that a positive investment outcome will be achieved.