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ISAs Explained

Millions of people across the UK hold ISAs and benefit from their generous tax-free advantages.

There are differences between the types of ISAs and there are limits on how much you can invest each year. Here, we answer the most frequently asked questions.

What is an ISA?

An ISA is an Individual Savings Account designed to be a tax efficient way to save or invest money. They were introduced in 1999 by the UK Government to encourage people to save.

Any money you earn in interest, income or capital gains from investments remains tax-free. You don’t even need to declare any ISA earnings on your tax return.

When the government first introduced ISAs, the limit on how much people could invest each year was £7,000. Over the years, it has increased and the allowance for the 2019/20 tax year is £20,000.

What is a Stocks and Shares ISA?

Rather than leaving your money in a Cash ISA, a Stocks and Shares ISA lets you put your money into a wide range of investments, such as company shares, government and corporate bonds and funds.

A Stocks and Shares ISA allows you to invest in the stock market, where you may achieve a higher return when compared with cash. In fact, over the last 118 years UK equities returned 5.1 per cent on average per year and cash returned 0.7 per cent (Barclays Equity Gilt Study 2018).

Investing is 90% more likely to outperform cash over 10 years (Barclays Equity Gilt Study 2016) but the stock market can fall as well as rise, so you need to be aware of the risks and be comfortable with investing over the longer term.

Open an ISA

What is a Cash ISA?

A Cash ISA is a simple way to begin saving. The interest you receive from your savings isn’t taxed, so all the interest you earn, you keep. It is worth bearing in mind that if the rate of interest is relatively low, the rate of return on your savings will also be low.

Right now, interest rates are lower than inflation, so the spending power of your cash savings could be falling. If the inflation rate remains higher than the interest you are getting, this could erode your money in real terms.

Selftrade does not provide a Cash ISA.

Am I eligible for a Stocks and Shares ISA?

UK residents over the age of 18 are eligible to open a Stocks and Shares ISA.

If you move overseas and, for tax purposes, are no longer a UK resident, you can keep your existing ISAs and their tax benefits but you are not permitted to make further investments into an ISA. This does not apply to Crown employees such as armed forces personnel stationed overseas.

 

How many ISAs can you have?

You can put money into a Cash ISA, a Stocks and Shares ISA, a Lifetime ISA, an Innovative Finance ISA or a combination in each tax year, up to the maximum ISA allowance.

There is no need to open a new ISA each year, your account remains open and all that changes each April is that you are entitled to a new yearly tax-free allowance.

You can transfer money already held in a Stocks and Shares or Cash ISA with another provider to Selftrade whenever you choose.

Open an ISA   Transfer your ISA

How the allowance is set

Each year the government sets a limit on the amount you can save, and the ISA allowance currently stands at £20,000.

The allowance is reviewed annually by HM Treasury. Paying money into an ISA is called a subscription.

The total amount you subscribe in the tax year must be within the limits set out here:

What can I invest in?

Cash ISAs are limited to savings in bank and building society accounts and some National Savings and Investments products. With a Stocks and Shares ISA, there is a much wider range of options, including:

  • LSE and AIM listed equities
  • Exchange Traded Funds (ETFs)
  • Exchange Traded Commodities (ETCs)
  • Exchange Traded Notes
  • Funds (Units Trusts and OEICs)
  • Investment Trusts
  • Gilts and Bonds
  • Overseas Securities
  • Warrants and Covered Warrants
What are the benefits of a Selftrade Stocks and Shares ISA?

Selftrade’s platform and support is designed to give individual investors everything they need to plan and monitor their investment, whenever and wherever they are. We are competitively priced too and the more you trade, the lower the fee.

Here are Selftrade’s benefits at a glance.

  • A low flat quarterly fee that won’t increase as your investment grows (fund holdings are subject to a fee - see full pricing details)
  • A dedicated Customer Experience Centre
  • Free 24/7 access to best-in-class investment data, tools and insight
  • Fully authorised and regulated by the Financial Conduct Authority
  • Selftrade is part of Equiniti Group plc, a FTSE 250 listed company working with 28 million shareholders and pensioners
  • Your investments are protected by the Financial Services Compensation Scheme

Ready to get started?

I’ve still got questions!

We’re on hand to help at our Customer Experience Centre on 0345 0700 720