Stocks and Shares ISA

By: EconomyWatch   Date: 30 September 2009

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A stocks and shares ISA (Individual Savings Account) is a good investment option for savers who have a long term investment horizon. Stocks and shares ISAs allow you to invest your money in many investment vehicles, such as Open-Ended Investment Companies (OEICs) that are similar to unit trusts, investment trusts and governments, and corporate bonds as well as individual shares.

Stock and Share ISA – Things To Consider

A stock and share ISA is different from a cash ISA. While cash ISAs work like tax free savings accounts, the returns from stocks and shares ISAs depend upon the performance of the stock market. Let us see some of the crucial factors to consider when choosing the best ISA.

Limits: An individual can invest up to £7,200 in a stocks and shares ISA each tax year. You can invest up to £10,200 each year if you are over 50. You also have the option to invest a maximum of £3,600 in a cash ISA. However, one can not invest more than £7,200 in both cash and stocks and shares ISAs combined.

Tax: While cash ISAs are completely tax free, stocks and shares ISAs are not. If you buy share based investments such as OEICs and unit trusts, you will be exempted from taxes only if you are a higher rate tax payer. The interest earned will be tax free if you are investing in interest-bearing instruments, such as corporate bonds.

Getting Ready: It is better to prepare yourself before investing in a stocks and shares ISA.

  • Make sure that you have cleared your debts such as personal loans or credit card debts.

  • Protect your dependents with life insurance or an income protection plan.

  • Keep enough cash for emergencies.

  • Make sure that you can hold your investments for five years.

  • Prepare yourself to lose some or all the money.

Once you are ready for investing in a stocks and shares ISA, scout around for an ISA manager that has a record of consistent performance on stocks and shares ISA over the past few years. Also, you should zero in on a provider that charges you competitive fees for managing your account.


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