Important information - investment value can go up or down and you could get back less than you invest. If you're in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.
What is a Stocks and Shares ISA?
A stocks and shares ISA is a tax-free savings account. The money you put in can be used to buy shares, funds, ETFs and other types of investment.
Any investments you make in the ISA are sheltered from UK income tax and capital gains tax. However, there is a maximum of £20,000 per year that you can invest in a stocks and shares ISA.
What are the Stocks and Shares ISA tax benefits?
Investing in a stocks and shares ISA gives you several tax benefits:
- No tax on profits or capital gains
- No tax on interest earned on bonds
- No tax on dividend income.
Remember that there is always a risk that your investments can go down as well as up. You should not invest money that you can’t afford to lose.
Stocks and shares ISA rules
There are a few rules you will need to be aware of before you start investing in an ISA:
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 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 ISA 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.
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 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 investments 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 can 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.
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 an ISA if you are the account holder, their spouse, civil partner or immediate family member. Remember the maximum you can contribute in a single tax year is £20,000 (2020/21).
A Junior ISA must be opened and managed by a parent or guardian. Once open, anybody can contribute to it up to the maximum annual allowance of £9,000 (2020/21).
Stocks and Shares ISA rules after death & inheritance tax
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 happen, 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. This is known as Additional Permitted Subscription. In other words, it’s an additional allowance on top of their personal 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 an ISA?
You can transfer your ISA at any time. 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, giving you the potential for better gains (but stocks and shares also come with a risk of loss).
You can transfer your Stocks and Shares ISA without having to sell your existing holdings (called an in-specie transfer)
Can I transfer part of my ISA?
Yes, but you can only transfer money you’ve invested in previous tax years. If you want to transfer money you’ve invested in an ISA during the current tax year, you will have to transfer all of it.
How long will it take to transfer my Stocks and Shares ISA?
The process for transferring a Stocks and Shares ISA should take up to 6 weeks. 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.