Stocks and shares ISAs explained
An investment ISA can offer the potential for higher returns than cash over the long term, but they come with risks. Our guide explains...
Key takeaways
A stocks and shares ISA (S&S ISA) is a tax-efficient investment product that allows you to invest in funds, shares, stocks, and bonds
Be aware that investments can fall as well as rise
You can save up to £20,000 tax-free in ISAs
Tax rules mean ntocks and shares ISAs don’t shield you from inheritance tax or stamp duty
What is a stocks and shares ISA?
A stocks & shares ISA (S&S ISA), sometimes called an investment ISA, is an investment account that lets you invest in funds, investments, shares, stocks and bonds.
ISA stands for Individual Savings Account. Saving into any type of ISA account is tax-efficient, as your savings (up to £20,000) will be protected from capital gains tax and income tax.
It's important to remember that when you invest your money, there is the risk that your investment could fall as well as rise.
By carrying out an ISA transfer, you can move money between different types of ISA, for example from a cash ISA to a stocks and shares ISA.
What should I consider before opening a stocks and shares ISA?
Here are some things to think about before you open a stocks and shares ISA:
Value of your investment: Always keep in mind that with a stocks & shares ISA, there is a possibility your investment could fall as well as increase. So be prepared that you could lose money with this type of ISA
Fees and charges: Stocks and shares ISAs tend to have fund fees and charges, such as platform, management and exit fees when it comes to selling the assets
Your individual circumstances: Because of market volatility, stocks and shares ISAsare best suited for long-term investing. A financial adviser can help you plan your finances for the long-term.
How do stocks and shares ISAs work?
Here is how stocks and shares ISAs work:
Open an ISA with a provider
You can open an ISA via:
· an investment platform such as Hargreaves Lansdown, AJ Bell, or Interactive Investor
· a robo-advisor such as Nutmeg or Moneybox
· a direct fund managers such as Vanguard or Fidelity
There are two main investment options:
· Self-select stocks & shares ISA – you choose and manage investment funds dependent on your risk level
· Managed/robo stocks & shares ISA – a fund manager or algorithm does it for you
Charges: Depending on the ISA provider and the type of investment, there may be charges for managing the account and when you want to sell your investments
Contribute funds
The annual ISA allowance is £20,000 (2025/26 tax year).
You can invest lump sums or regular monthly payments. You can’t carry unused allowance into the next year.
Invest in a range of assets
Within a stocks & shares ISA, you can buy:
Individual UK or international shares
Funds, like unit trusts or OEICs
ETFs (Exchange-Traded Funds)
Bonds (corporate or government)
Investment trusts
Some platforms offer themed portfolios or ethical investments
Your investments grow tax-free
ISA tax benefits mean you don’t pay:
Capital gains tax on profits from selling investments
Dividend tax on dividend income
Income tax on bond interest
What are the different types of stocks and shares ISA?
There are two types of stocks and shares ISA:
Self-select ISA: If you want to be hands-on with your investment then a self-select ISA could be ideal. With this type of ISA, you choose the investments that you make. Because the market can be unpredictable and your investment could decrease in value, it’s crucial that you research thoroughly before investing in any stocks.
Managed stocks and shares ISA: This is where an investment manager will look after the funds on your behalf to try to maximise your returns. There is usually a fee for this service, but it is usually best for beginners.
What can I invest in with a Stocks and Shares ISA?
You can include a wide range of investments (sometimes called assets) in a stocks and shares ISA in the UK. These can include:
Individual stocks and shares
Unit trusts
Investment trusts
Exchange-traded funds (ETFs)
Government or corporate bonds
Open Ended Investment Companies (OEICs)
What is the ISA allowance for the 2025/2026 tax year?
You can save up to £20,000 tax-free in ISAs for the 2025/2026 tax year. This total ISA contribution allowance is the same for the 2026/2027 tax year but only £12,000 can be saved in cash. The remaining £8,000 must be invested in stocks and shares.
You can now open one of each type of ISA each tax year, as long as you don't exceed the annual subscription limit of £20,000.
You could also use a Lifetime ISA or part of the allowance, if eligible. Lifetime ISAs are suitable for anyone saving for a first home or retirement. You can deposit up to £4,000 a year and receive a 25% bonus from the Government.
ISA rules mean you need to be a UK resident to open and ISA and you cannot roll your allowance over to the next tax year.
Will I have to pay tax on my returns from an investment ISA?
You don’t have to pay dividends tax, capital gains tax or income tax on the returns on your stocks and shares ISA.
If you move existing investments into a stocks and shares ISA, it could lead to a capital gains charge because your ISA provider has to sell the investments before re-purchasing them within the ISA.
It depends on whether your investments have increased in value and if you’ve already used up your capital gains allowance.
Stocks and shares ISAs also don’t shield you from inheritance tax or stamp duty when buying shares.
Is my money safe in a stocks & shares ISA?
As with all stocks and shares ISAs the value of your investment can go down as well as up, so you should choose your investments wisely and factor in your own appetite for risk.
If your ISA provider goes bust, then the money in your account is protected up to the first £120,000 through the Financial Services Compensation Scheme (FSCS). This is for UK ISA providers who are regulated by the Financial Conduct Authority.
Other useful guides
If you want to be in-the-know with investing, we’ve got a range of articles you can read:
Ethical stocks and shares explained
Should I invest my money or save it?
Find a stocks and shares ISA with MoneySuperMarket
Looking for the appropriate stocks and shares ISA can seem overwhelming, especially if you’re new to investing. MoneySuperMarket can help you find an investment ISA, you can view a range of stocks and shares ISAs quickly and easily with us.
We’ll show you details about the different accounts, the minimum deposit you’ll need to invest and the management fees and charges that might apply.
If you are looking to switch your ISA funds check out our guide for more information.
Frequently asked questions
What are stocks and shares?
A stock is a portion of ownership of multiple companies, for example, owning stocks in Meta and Google.
Shares are units of ownership in a specific company, for example, you could own twenty shares in MoneySuperMarket Group.
Can I transfer my stocks and shares ISA?
Yes, you can transfer your stocks and shares ISA in two ways. With an ‘in specie’ transfer, all your investments in your ISA are transferred to your new provider. With a ‘cash transfer’, your investments are sold and the earnings given to your new provider.
How many stocks and shares ISAs can I open?
You can open as many stocks and shares ISA as you like in any tax year and benefit from tax-free returns, as long as you stay within the £20,000 annual subscription limit. You can also retain stocks and shares ISAs from previous years.
Can I withdraw my money from a stocks and shares ISA?
Yes, you’re able to withdraw money from your ISA whenever you want.
What is the difference between a stocks and shares ISA and a cash ISA?
A stocks and shares ISA is an investment where the return you get depends on the value of the assets you buy. This means it is variable and can go up and down.
In contrast, a cash ISA is a tax-free savings account, where you’ll receive interest on your balance. As such, there is more risk to a stocks and shares ISA, but also the chance of better returns.
Author
Tim Heming
Personal Finance Expert
Tim Heming is a journalist and editor who has written about personal finance for national newspapers and consumer websites for 15 years. Tim enjoys providing no-nonsense information to help consumers...
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Emma Lunn
Personal finance expert
Emma has written about personal finance for almost 20 years, with a career spanning several recessions and their inevitable consequences. Emma’s main focus is helping people learn to manage their...