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40% of people in the UK are considering an investment ISA - why now could be the time to get one

ISA season is in full swing and there’s still a few weeks to maximise your £20,000 ISA allowance.

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An investment ISA can offer better returns if you have long-term savings goals, but your capital is always at risk.

Investing has always been a complex subject, but should its complexity deter savers from exploring an investment opportunity?

This is a tricky question, and the answer will always be personal to each individual. After all, investing does come with risks, as you could get back less than you put in. 

But, the high interest rates we are currently seeing in the savings account market won’t last forever, especially as experts are predicting the base rate will decrease in a few months. 

If this happens, attention might turn to investing, as this could give higher returns than traditional savings accounts. 

Investment ISAs put your capital at risk, and you may get back less than you originally invested.

So, to understand how the UK population are feeling about investing, we conducted a survey*. We found that more than a third of respondents are currently investing, with the rest not investing due to either lack of funds, fear of losing money or a lack of knowledge of where to start. Our questions then turned to specific investments, and one in particular caught our respondents attention - the investment ISA

40% of respondents who are currently not investing would consider an investment ISA as a way to start this journey. Plus, almost half of respondents who are currently investing and work full time would consider an investment ISA next. This shows that there is clearly an appetite for this type of ISA.

An investment ISA acts in a similar way to a cash ISA - as the interest you earn is tax-free - but instead of saving with cash, you use your money to invest in assets like stocks and shares. 

An investment ISA can offer better returns in comparison to a cash ISA if you have long-term savings goals, although your capital is always at risk. 

There are two types of investment ISAs - a self-selected or managed investment ISA. Self-selected works well for people who want to choose the exact bonds or shares they want to invest in, whereas managed does the hard work for you. 

A managed investment ISA normally asks you a few questions and then it’ll pick out the right shares to suit your risk tolerance and the amount of money you are comfortable investing. 

Before deciding on the type of investment ISA, it’s important to understand the risks involved and how much control you want in your investments. You’ll also need to consider the costs involved as investment ISAs can come with some fees - whether that’s trading, platform or management fees. 

An investment ISA is also included in the £20,000 tax-free ISA allowance for all adults. This means you can put up to £20,000 in an investment ISA or split it between the other types of ISAs; including cash, innovative finance and lifetime. 

Currently, you can only have one of each type of ISA, but the government has plans for an ISA reform which will abolish this rule and make things more flexible for the saver. Plus, in the Spring Budget last week, a new type of ISA was announced. The British ISA comes with an extra allowance of £5,000 and encourages people to invest in UK businesses. 

If you haven’t used your ISA allowance yet, now is the time to act as this year’s allowance will end on April 5. If you don’t use the allowance, it will then reset on April 6 and you’ll have another £20,000 to use over the next year. 

This means if you are currently paying tax on the interest you are earning on your savings, it makes sense to use the allowance now, before this year’s allowance runs out. 

If you aren’t sure where the best place for your money is, it’s always a good idea to speak with an independent financial adviser for guidance. 

*Survey about investing conducted by Censuswide on behalf of money.co.uk - 2003 respondents from the UK aged 18 and over. This survey was conducted in February 2024.

Start investing with a stocks and shares ISA

About Lucinda O'Brien

As a trained journalist, Lucinda has spent the past 10 years writing and editing content for regional and national titles, including The Mirror, WalesOnline and Manchester Evening News. She is now a personal finance editor and specialises in savings, helping people to make confident financial decisions so they can save for what matters most.

View Lucinda O'Brien's full biography here or visit the money.co.uk press centre for our latest news.