Whether it’s travelling around the world or planning for your golden years, investing in a Stocks and Shares ISA could help bring your long-term goals to life. Here are some tips to help you start your ISA adventure.
What is a Stocks and Shares ISA?
It’s not always well-known, but when you invest, you may need to pay tax on any income you earn or gains you make when you sell investments. Tax might seem harmless, but it could ultimately eat into your returns. Luckily, if you’re a UK resident, it’s possible to remove tax from the equation by placing your investments inside an ISA wrapper. This invisible wrapper is essentially designed to stop the government from taking a portion of your potential returns - that way you can preserve more of your money.
If you decide to invest in a Stocks and Shares ISA, it’s important to understand the different rules that come with it. With a Stocks and Shares ISA, you can’t invest as much as you want. Every tax year, there’s a limit that you can’t exceed – that’s your ISA allowance. Currently, you can put up to £20,000 (subject to change) in a Stocks and Shares ISA. But more importantly, each year, you have until midnight on 5th April to use your ISA allowance, otherwise you’ll lose it forever. The way you use your ISA allowance is totally up to you. You could put it all in a Stocks and Shares ISA, or you could invest some in a Stocks and Shares ISA and put the rest in a Cash ISA, or you could also split your annual ISA allowance between a Stocks and Shares ISAs, and other types of ISAs. One thing to keep in mind though is that you can only pay into one of each ISA type in the same tax year, and the maximum you can put in a Lifetime ISA is £4,000.
How to start investing in a Stocks and Shares ISA
If you want to open a Stocks and Shares ISA, you need to select the route that’s right for you. For instance, you could decide to pick your own investments, using a fund supermarket. With such platform, you can buy funds and choose to hold them in an ISA. Funds are like baskets full of different investments (e.g. shares, bonds, property, and commodities), and they can help spread your risk. Indeed, as your money gets invested in a plethora of investments, you’re less likely to lose everything during stormy times. Choosing your own funds is a good way to keep control over your investment journey, however doing it all by yourself can often be time consuming and typically requires extensive knowledge of the investment world. So, if you’re too busy or don’t feel confident enough to pick your own funds, it could be a good idea to let the experts do the investing for you.
Nowadays, there are many robo-investing platforms, like Wealthify, that will build you a Stocks and Shares ISA and manage it on your behalf. What do you have to do to get started? Well, you simply need to download an app, specify that you want to open a Stocks and Shares ISA, and choose how much you’d like to put in your account - with Wealthify, you can start with as little as you want. You’ll also need to select the risk level that suits you and our investment team will build you a plan with just the right mix of investments. They’ll also keep a close eye on financial markets and make adjustments to your Stocks and Shares ISA when needed to keep it on track. This is truly effortless investing for you!
The tax treatment depends on your individual circumstances and maybe subject to change in the future.
Please remember the value of your investments can go down as well as up, and you could get back less than invested.