Find our best stocks and shares ISAs

A stocks and shares ISA is a way of buying and selling shares in companies and other assets while escaping most forms of tax on any growth.

It is also known as an investment ISA.

Right now, every adult has a £20,000 ISA allowance each tax year and this can be put into a stocks and shares ISA. You won't pay dividend, capital gains or income tax on any profits or interest you earn from the investments held within a stocks and shares ISA.

You can either use your entire ISA allowance for a stocks and shares ISA, or you can split it between different types of ISAs.

ISA rules change from April 2027 though. While the overall £20,000 ISA allowance remains, if you’re under 65 you will only be able to put up to £12,000 a year into a cash ISA. Any remaining allowance, up to £8,000, must then be used for a stocks and shares ISA (or other non-cash ISA).

To open a stocks and shares ISA you need to be at least 18 years old and a UK resident. You also can’t open a stocks and shares ISA for someone else - you have to do it yourself.

You can pay into more than one stocks and shares ISA during the tax year and you can have a cash ISA, lifetime ISA and an innovative finance ISA open too, provided you don't pay in more than £20,000 across all of them in the same year.

You can open a new stocks and shares ISA each tax year if you wish, and you don't need to close old ones to open a new one.

Once you've decided to open an investment ISA, you need to decide what to do with the money you put in there.

If you've decided to go for a managed ISA, you simply need to answer a few questions about your savings goals and how comfortable you are with risk - then transfer some cash to them.

If you've decided to take more control of your money, you'll need to transfer some money to your provider. Once you've done that you can start buying and selling individual shares, funds and more to hold in your portfolio yourself.

Lots of ISA providers will offer tips, tools and research on the various funds they offer to help you choose between them - and some will even offer model portfolios for you to copy.

If you're unsure how best to proceed you can speak with your ISA provider in the first instance, who can discuss specifics relating to your ISA.

Tax efficiency

Returns generated within a investment ISA, including capital gains and dividends, are tax-free, providing significant tax advantages compared to investing outside of an ISA wrapper.

Potential for higher returns

Investing in the financial markets through a investment ISA offers the potential for higher returns compared to cash savings accounts over the long term, although returns are not guaranteed.

Investment flexibility

Investment ISAs offer a wide range of investment options, allowing investors to create a diversified portfolio tailored to their risk tolerance and investment goals.

Compound growth

Reinvesting dividends and capital gains within investment ISAs can accelerate the growth of investments over time through the power of compounding.

Retirement planning

Stocks and Shares ISAs can be used as a tax-efficient vehicle for retirement savings, providing investors with the opportunity to build a substantial nest egg for their later years.

Market risk

Investing in the financial markets carries inherent risks, including the risk of capital loss due to market fluctuations, economic downturns, or geopolitical events.

Volatility

Investment ISAs are subject to market volatility, with the value of investments fluctuating over time. Investors should be prepared for short-term fluctuations and focus on long-term investment objectives.

Currency risk

Investing in international assets within a investment ISA exposes investors to currency risk, as fluctuations in exchange rates can impact the value of investments denominated in foreign currencies.

Inflation risk

Inflation erodes the purchasing power of money over time, potentially reducing the real value of investment returns. Investors should consider inflation risk when planning their investment strategy.

Liquidity risk

Some investments within a Investment ISA, such as certain types of bonds or real estate, may have limited liquidity, making it challenging to sell or exit positions quickly.

Stocks and shares ISAs let you put money in the markets while escaping tax on returns, but they're not the only way to do this.

Pensions and lifetime ISAs also let you escape tax on the money you make from the markets - and come with added tax breaks on top.

However, they also come with age restrictions on when you can withdraw your money penalty free, or even at all, meaning they're best used for long-term savings.

On top of those two products, you also have a tax-free allowance for everything from savings interest to capital gains - meaning you need to earn a fair amount before the tax-free status of an ISA comes into effect.

But there are very few downsides to choosing a stocks and shares ISA compared to other ways of investing, with the same features available inside and outside of an ISA, so it makes sense to start there in most cases.

After all, while you might not pay tax on your returns now, if things go well you could find the extra protection that an ISA offers rather useful in a few years' time.

But if you're saving for the short term or don't want to risk your money in the hope of higher rewards, a simple savings account or cash ISA might be your best bet.