Stocks and Shares ISA

Putting your money into a Stocks and Shares ISA is one of the options that you can choose to enjoy tax-free benefits from your investments. The total annual ISA (which stands for Individual Savings Account) allowance for each UK resident over the age of 16 is £7,200, and this rises to £10,200 for everyone over the age of 50. From 6th April 2010, everyone will receive this higher ISA allowance. Out of the two components – cash, and stocks and shares - the Stocks and Shares ISA is the only one that allows you to invest the full amount. You can only use up to half of the allowance for a Cash ISA. If you wanted to put, say, £2,000 in a Cash ISA, you would be able to use the remaining £5,200/£8,200 for a Stocks and Shares ISA.

A Stocks and Shares ISA allows you to put your money into various investment types, such as unit trusts and OEICs (open-ended investment companies), and corporate and government bonds. Although you will still be charged the normal fee for having the investments managed for you, you will not be charged capital gains tax on any returns you get from the growth of your investments. The fact that you are investing into company profitability means that your investment may grow, but it may also shrink, depending on the performance of your investments. Therefore, a Stocks and Shares ISA is a riskier proposition than putting your money into the cash equivalent, and it is worth consulting an independent financial adviser before making your decision.

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A Few ISA Basics

• ISAs (Individual Savings Accounts) are investments on which you do not have to pay taxes or capital gains taxes.
• ISAs tend to have very good interest rates, so people usually see a good return from investing in an ISA.
• There are stocks and shares ISAs and cash ISAs.