Stocks and Shares ISA

As I’ve mentioned previously, I have the most personal experience with the Stock and Shares ISA. This allows UK residents and ISA owners to invest up to their £20,000 annual contribution limit in the stock market, with both capital gains and dividend distributions tax free. This ISA format allows users to invest in market-tracking funds, ETFs, and individual equities (though charges may apply). Despite the intrinsic risk attached to stock market investing, equity positions can offer higher returns on capital invested, allowing users to maximise their tax-free gains.

Typically banks and other ISA offering institutions will offer two approaches to investing, tailored to the owners needs. The first method of ISA investing involves the contribution of capital to ready-made portfolios, these are user friendly packages covering all retail investors from the new and unexperienced to retirees. Institutions manage these portfolios, altering the level of expected returns and adopted risk to match the investors’ needs. These packages usually involve owners routinely paying into their ISA, which in turn is managed on behalf of them by trained staff. This provides a passive investment approach to working toward financial goals.

Alternatively, some owners choose to open self-investment portfolios. These are somewhat self-explanatory in that they allow users to invest and trade equity assets they have personally picked. This entails a greater level of risk alongside market exposure, requiring a higher levels of market understanding and financial education.