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Compare Stocks & Shares ISA Accounts in the UK
Use our comparison tables to compare ISA brokers in the UK. Compare key features like research, added value, IPO and placing access, commission and costs.
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What is a stocks and shares ISA?
A stocks and shares ISA is an account that allows individuals to invest in stocks, shares, bonds or commercial property without paying any tax on their investments. Every British citizen over the age of 18 can invest up to £20,000 each year in a combination of cash ISAs, innovative finance ISAs and stocks and shares ISAs. Stocks and shares ISAs are higher risk than cash ISAs, but can also produce a higher return.
How do they work?
When you set up a stocks and shares ISA, any investments that you place within it will be exempt from the usual taxes on income or gains. This means that when you sell assets that are held within an equity ISA, there will be no Capital Gains Tax or Income Tax to pay on dividends or corporate bond interest, regardless of whether you’ve used up the relevant personal allowance.
Whether a stocks and shares ISA will be of benefit to you will depend on whether your investments exceed the personal allowances in any of these areas. For larger investors, the tax advantage of a stocks and shares ISA will be significant. For very small investors, their ISA allowance might be better used for a cash ISA.
Setting up a stocks and shares ISA
A stockbroker is required to set up and run a stocks and shares ISA. There are a variety of providers who can offer this service but the cheapest are online platforms. You will be charged for using the platform, for buying and selling assets and for the services of fund managers who are managing any funds in which you have invested. There could also be a charge for transferring from one platform provider to another.
Choosing a provider
– What to avoid
Don’t choose a platform without understanding all of the charges. This will allow you to compare ISA accounts and pick the one that will best suit your investing style. The transaction fees will be very important for active investors, but much less so for people who take a more passive approach.
– What to look for
Pay attention to the transfer out fee. In general, it is recommended to invest in funds for at least five years in order to smooth out any temporary falls in value. Over this time period, the fees charged by a provider could easily become uncompetitive compared to other platforms.
An example of investing using stocks and shares ISAs
There are many different approaches to investment, but a popular method of reducing risk is to drip feed money into an ISA over the course of a year. This ensures that the investor is protected against drops in the value of the equities. For example, if £5,000 is invested in a fund in March and it drops in value by 20%, then the investor will be left with £4,000. A drip feeder would buy £2,500 in March, which would be worth £2,000 in April, and could then buy a further £2,500 at the lower price. This would leave the investor with £4,500 and a larger stake in the fund than the non-drip feeding example.
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