Setting up a stocks and shares ISA can feel intimidating and complicated – but if it’s something you are considering, this edition of our Savings Guide should help.
We’ve teamed up with Grace Whalley, a chartered financial planner at The Private Office, about how to get started, what to consider and what you should be doing if you already have one…
A quick introduction
Everyone in the UK aged 18 or older is allowed to save £20,000 a year in an ISA, tax-free.
You can use all or part of this allowance to invest your money in funds, bonds and shares in companies by using a stocks and shares ISA.
The idea is that any returns you make are protected from income tax and capital gains tax.
“This is particularly important now, as allowances like the dividend and capital gains tax thresholds have been reduced,” said Whalley.
Unlike a cash ISA, which is simply a tax-free savings account, a stocks and shares ISA involves investing in financial markets, meaning the value of your money can go up and down.
But Whalley points out that unless you sell when it’s down, it is possible to wait for a recovery.
Who are stocks and shares ISAs suited to?
People who are comfortable taking on some risk, and have medium to long-term goals for their savings, can benefit from a stocks and shares ISA, Whalley said.
They are particularly appropriate for people who can commit to investing for at least five years.
This is because it allows time for markets to recover from any short-term dips.
If you are looking for short-term gains, a stocks and shares ISA might not be the best option.
You do not need to be an experienced investor to open an account – many providers offer simple, diversified, pre-made portfolios that can match the level of risk you would like to take.
Thinking about opening one? Consider…
