The UK Government offer numerous tax-free ways of saving and investing your money. The most common type is the Individual savings account or ISA for short. Depending on personal circumstances ISAs are usually a very efficient way of investing money for the future because ISAs are within a ‘tax wrapper’ up to a certain value. In order to open a stocks and shares ISA you must be over the age of 18. In the UK there a 3 main ISA accounts available. These are:

• stocks and shares ISA
• lifetime ISA
• cash ISA

In this article, we are looking at the stocks and shares of ISA.

PLEASE NOTE: Any information on this page or any other subsequent page is not advice and is just free information for the public. Please seek a financial advisor for personal recommendations.

What is the maximum investment you can make in an ISA?

The UK government set a limit to the amount of money that can be put into the ISA every year which is non-taxable. In 2021/2022 this amount sits at £20,000. And the next tax year 2022/2023 the chancellor has said it will stay at this value. You can in theory put more than the £20,000 tax-free allowance into the ISA however that may not be the most efficient thing to do. Again, this would be based purely on personal circumstances.

Once you have £20,000 or less in your ISA, any profit, capital gains or interest that you make on the ISA will not be subject to any form of tax, this also includes realising gains within the ISA. This same concept applies to potential profits that you may reinvest into the account in the tax year. The allowance is only taken up by money that you personally put in the account.

You can also transfer money between different ISA providers without it affecting your annual allowance. You are also not allowed to move money from a stocks and shares ISA to a cash ISA, but you can do it the other way around.

Risks in the market and choosing the right investments?

A big clue to what your money will be invested in is within the name of the account, ‘stocks and shares’, so there is a reasonable amount of risk involved. Everyone knows that stocks can go up as well as down and you could lose more than what you invested. This is a risk that you take when investing in a stocks and shares ISA. There are many steps you can take to offset risks and quite often the ISA providers will help you determine the level of risk you are willing to take. For instance, if you were to use IG.com as a provider for your ISA their smart portfolio would have an application form that asks about your goals, your personal circumstances and risk attitude. It then provides you with a number between 1 and 5, with 1 being low risk and 5 being high risk. IG will then create a portfolio around that risk attitude.

Some people like to try it themselves and you can also self-invest your ISA allowance. This means you pick how you want to invest it; you decide when to buy and when to sell. IG.com again offer a cutting-edge platform for this and Minipip can offer free sessions on how to use the account. Please get in contact with us if you require any assistance.