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Using an ISA to invest

  • 3 min reading time
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A stocks and shares ISA gives you access to the potential gains of the markets in a tax-efficient way – and there are hundreds to choose from.

What you will learn

  • How stocks and shares ISAs differ from their cash cousins
  • How to decide if a stocks and shares ISA is for you
  • How to choose from the hundreds of options available

Every UK adult has an annual ISA allowance – currently set at £20,000. You can use that to invest in a cash ISA or a stocks and shares ISA, or split your investment between the two.

These two types of ISA are very different. A cash ISA is essentially a tax-efficient savings account. If you take out a stocks and shares ISA, you’ll be investing in the stock market, with all the risks that brings.

However, a stocks and shares ISA may be the right choice for you if:

  • You’re able to make a long-term investment: to have a good chance of riding out any peaks and troughs in the market you’ll need to invest for at least five years. So, if you think you may need your money before that, a cash option is better.
  • You’re willing to accept some risk: Historically, stocks and shares performance has outstripped that of savings accounts, but there’s no guarantee that’ll be the case in future: you could lose some or all of your money.

If your stocks and shares ISA provider goes bust, the Financial Services Compensation Scheme should cover your investment up to £85,000. But it doesn’t protect you against losses if the fund itself performs poorly.

How to choose an ISA

There are hundreds of stocks and shares ISAs, and various ways to choose which one is right for you:

  • DIY investment websites: these allow you to pick your own investments, though you’ll need to do some research to make sure you are comfortable with doing this.
  • ‘Robo-investment’ platforms: these online services select a portfolio on your behalf, based on the level of risk you choose.
  • Independent financial advisers and wealth managers: qualified professionals who can give you detailed advice based on your personal goals.

You may want to do your own research first. Browse the national and financial press to get a feel for what’s available. Then decide whether you need personalised advice before investing. You can read more about the potential costs here.

How to use your ISA

Once you’ve selected your stocks and shares ISA, you can choose to invest with a lump sum, or by making regular monthly payments. And if you’re unhappy with performance, you can switch to a different ISA later.

As your tax allowances follow the UK’s fiscal year, you have until April 6 to use your annual ISA allowance of £20,000.

Did you know?

ISA providers have to allow you to transfer your money to a different ISA, but they’re not obliged to accept transfers in, so check the rules for your chosen company.

The key rule to bear in mind when thinking about an ISA is to consider it as part of your total investment portfolio.

This should include a good mix to spread your risk as widely as possible. For more information, read our article on why investing in stocks and shares is not just for experts.

Risk notice

Any information provided should not be considered personal advice. Past performance is not a guide to future performance. You may not get back the full amount you invest. If you have any doubts about making your own investment decisions, seek financial advice. Tax treatment depends on individual circumstances and may be subject to change in the future. The information given is not intended to provide legal, tax or financial advice.

Compare accounts

  • Choose your own investments – pick your own stocks and shares to meet your investment needs, or choose from our Select List of funds.
  • Ready-made investments – if you want a simpler option, you can choose between our three diversified funds: low, medium or high risk.

Investment Ideas

Need some inspiration when it comes to your investments? Read our expert articles for further information on some of the different funds and shares available to invest in.

Important legal information

Bank of Scotland Share Dealing Service is operated by Halifax Share Dealing Limited. Halifax Share Dealing Limited. Registered in England and Wales No. 3195646. Registered Office: Trinity Road, Halifax, West Yorkshire HX1 2RG. Authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN under number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.

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