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What is a Stocks and Shares ISA?
A Stocks and Shares ISA – at Lloyds Bank also known as a Share Dealing ISA or Investment ISA – is a type of tax-efficient account. It allows you to put your money into a range of investments while protecting any income and capital gains from UK tax.
In this article, you’ll learn…
- How a Stocks and Shares ISA works.
- How to open a Stocks and Shares ISA.
- How much you can put in a Stocks and Shares ISA.
- What fees and charges may apply.
- How to transfer a Stocks and Shares ISA.
How does it work?
A Stocks and Shares ISA allows you to invest your money with the aim of helping it grow for the future. At the same time, it can protect your investment income and capital gains from UK Income and Capital Gains Tax.
There are two ways of investing with us with Stocks and Shares ISAs. The one you choose should depend on your individual circumstances, finances and priorities.
Ready-Made Investment ISA
When you’re new to investing, or have limited time for market research, Ready-Made Investments are put together for you, by experts.
Share Dealing ISA
Share Dealing Accounts offer a more hands-on approach to investing. You pick your own stocks, shares and funds according to your goals and experience.
Stocks and Shares ISAs are suitable for the longer term, as the value of investments can fall and rise. Like any investment, it’s important to know that you may not get back what you put in.
Stocks and Shares ISAs and tax
A key feature of Stocks and Shares ISAs is that your gains are exempt from both UK Income and Capital Gains Tax. Find out more about how ISAs protect you from UK tax.
How do I open a Stocks and Shares ISA?
Opening a Stocks and Shares ISA can be straightforward, but it’s important to make sure you’re familiar with the rules around ISA use. This might include things like what you need to open a Stocks and Shares ISA, how much you can invest, or whether it’s the right choice for you and your finances.
Am I eligible for a Stocks and Shares ISA?
You can open a Stocks and Shares ISA if:
- You are aged 18, or over.
- You’re a UK resident for tax purposes. If you don’t live in the UK, you must be a Crown Servant, or the spouse or civil partner of one.
When should I open a Stocks and Shares ISA?
This depends on your priorities, your finances and the level of risk you’re comfortable with. Start by considering the following:
- Have you got a financial safety net to cover unplanned costs (3 - 6 months of income).
- Are you willing to invest for the longer term (5 years+).
- Have you paid off any high-interest debt first?
How much can I put into a Stocks and Shares ISA?
Investing has the potential to bring benefits, but there are some rules to Stocks and Shares ISAs. Each tax year, the government sets a limit for how much money you can save – this is your annual ISA allowance.
- At the moment, the annual ISA allowance is a total of £20,000 across all of your accounts. This refreshes on the 6th April each year.
- You can invest with larger lump sums or smaller regular payments.
Depending on your circumstances, your ISA allowance is how much you can subscribe in a single tax year, not the total value of your investments.
Can you have a Cash ISA and a Stocks and Shares ISA?
Yes, you can have a Cash ISA and a Stocks and Shares ISA at the same time. But, you can’t subscribe more than £20,000, to any combination of ISAs in the same tax year.
Cash ISA
- For building UK tax-free savings over a short period (1 to 5 years).
- Cash ISA returns are based on agreed interest rates, reducing risk.
- Choose fixed-rate or instant access, depending on how you prioritise returns or withdrawals.
Stocks and Shares ISA
- For the longer term, giving your investments more potential to grow over time.
- Stocks and Shares ISAs have the potential for more significant gains and losses. They may rise or fall depending on the performance of your investments.
If you’d prefer to keep some money for the short term, you can spread your allowance across both a Cash ISA and a Stocks and Shares ISA. This can support both short and longer-term priorities, and protect your investments from UK tax.
You can only use your annual ISA allowance in the same tax year.
For example, if you pay £14,000 into a Stocks and Shares ISA, you can’t roll the remaining £6,000 into the following tax year.
If you invest your entire annual allowance in a Stocks and Shares ISA, you can’t increase this amount in the same tax year, regardless of performance.
Your annual ISA allowance resets in full every 6th April.
It’s important to note that ISA tax rules can change at any time.
How long should I leave my money invested?
Although there is no minimum time period, we recommend investing for at least 5 years.
This adds two benefits. First, allowing more time for your investment to grow. And second, helping your money absorb and recover from any dips in the market.
Stocks and Shares ISA fees and charges
Stocks and Shares ISAs come with a range of costs, which may include:
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Account fees |
Usually an account fee (also known as a platform fee) applies to your Stocks and Shares ISA. This may be a flat fee or a percentage of the value of your investments. |
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Buying and selling charges (also known as trading or dealing fees) |
Investments vary widely. Each time you buy or sell you may pay a percentage of the price, or a flat fee - and further charges may apply (such as Stamp Duty). |
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Fund charges |
Funds often carry charges and transaction costs payable to the fund manager for looking after your investment. These may be regular and/or annual but are taken directly from your investment by the fund manager. |
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Transfer fees |
It’s worth checking if your current provider charges for transferring an ISA to us. |
How to transfer a Stocks and Shares ISA
If you hold an ISA with another provider, you can switch your current or previous year’s ISA to Lloyds Bank. This could be a Stocks and Shares ISA or a Cash ISA. Simply open a Share Dealing ISA with us (or log into an existing one) and complete the online transfer form - we'll do the rest.
Why transfer?
Transferring your ISA means that you keep the money within the ISA wrapper and protected from UK tax. Transferring is a great way to combine investments and potentially save on account fees.
Key takeaways
Stocks and Shares ISA frequently asked questions
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A Stocks and Shares ISA is a tax-efficient way to invest your money for the future. As long as you’re willing to invest for the longer-term and a level of risk that feels right for you. This is because investments do rise and fall in value, and longer periods (i.e. 5+ years) allow them to weather market changes.
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All investing involves risk. Understanding what you're comfortable with, and can afford, is the best way to identify which investments can work for you.
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Ideally you should consider both. A Stocks and Shares ISA allows you to save longer term for the future, shielding your investment from UK tax. Cash savings are much more suited to short term needs, and are a good resource to draw on in emergencies.
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No, they're the same. They each involve investing your money in shares and other types of asset. They may offer different levels of risk and different asset types, but they share the same aim - to grow the value of your money over time.
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Yes. You can withdraw your money at any point. However, to avoid losses, it's wise to leave your investment for as long as possible (5+ years) and to make a withdrawal only when the value of an investment favours you.
If you do remove all or some money, it still counts as part of your annual ISA allowance. If you then decide to invest again, you can only add up to the remaining allowance for the same tax year. By keeping a cash safety net, you are better able to access money at short notice, without affecting the tax status of your ISA investment.
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If you accidentally exceed the £20,000 ISA limit, you can contact HMRC to correct it. If the excess money is left in the account, you may receive a warning letter at the end of the tax year. It’s possible that HMRC may also instruct your ISA provider to remove the invalid subscriptions and you may have to pay tax on any gains made. However, you may want to avoid withdrawing the excess funds until you speak with HMRC.
Ready-Made Investments
When you’re new to investing, or have limited time for market research, Ready-Made Investments are put together for you, by experts.
Share Dealing ISA
Share Dealing Accounts offer a more hands-on approach to investing. You pick your own stocks, shares and funds according to your goals and experience.
More about investing
Whether you’re new to investing or more experienced, it’s always good practice to keep learning. This is the perfect place to start.
Important legal information
The Lloyds Bank Direct Investments Service is operated by Halifax Share Dealing Limited. Registered Office: Trinity Road, Halifax, West Yorkshire, HX1 2RG. Registered in England and Wales no. 3195646. Halifax Share Dealing Limited is authorised and regulated by the Financial Conduct Authority under registration number 183332. A Member of the London Stock Exchange and an HM Revenue & Customs Approved ISA Manager.