Stocks and shares ISAs

A stocks and shares ISA is a tax-friendly wrapper that lets you use your annual ISA allowance to buy shares, fund units or other types of investment. This type of ISA aims to grow your money through dividends and capital appreciation, and any potential gains you make from your investment are protected from UK tax.

While all stocks and shares ISAs share the same principle of investing your money for growth, they don’t all work the same way. For example, some will allow you to select your own investments, while others (like Wesleyan’s Stocks and Shares ISA and WUTM’s Unit Trust ISA) are invested in funds that are expertly managed on your behalf.

This means that you don’t need to be an experienced investor to set up a stocks and shares ISA.

Each tax year (6th April to the following 5th April), there’s a certain amount of money you can invest in an ISA. For the tax year 2023/24, the limit you can invest in a stocks and shares ISA is £20,000.

You can put your full allowance in a stocks and shares ISA, or split it across several different types of ISA. For instance, you could put half in a cash ISA, and half in stocks and shares.

You don’t have to use your full £20,000 allowance, but bear in mind that any allowance you don’t use won’t roll over to the next tax year.

Technically, you can have as many as you like. Just be aware that you can only pay into one stocks and shares ISA per tax year. If you’ve already paid into a stocks and shares ISA this year, you would have to transfer the full balance of that ISA across to your new ISA before you can continue to contribute.

No, there’s no tax to pay on any growth or income you earn through a stocks and shares ISA, and no capital gains on your returns either.

Outside of an ISA wrapper, dividends of more than £2,000 would be taxed at 32.5% for higher-rate taxpayers and 38.1% for additional-rate taxpayers – so it’s potentially a big saving if you have a lot of money invested.

All stocks and shares ISAs are different, but generally, you can take money out of an investment ISA just as you would from a cash ISA. There are rarely penalties for withdrawal, though there may be a minimum withdrawal amount.

It’s worth bearing in mind that taking money out of your stocks and shares ISA in the short term could stunt the growth of your investment, which is why it’s usually best to only invest money you won’t need to access for at least five years.

Yes, you can hold a cash ISA and a stocks and shares ISA at the same time, and you can pay into both types of ISA in the same tax year. The £20,000 ISA allowance is combined though, meaning you don’t get a separate allowance for each type of account.

Yes, you can. Usually, you can choose whether to transfer the whole balance or just some of it. Regardless of how much you transfer, it won’t affect your allowance for the tax year if the amount you’re transferring was built up in a previous tax year.

To open a Wesleyan Stocks and Shares ISA, you’ll need to be a UK resident (for tax purposes) aged between 18 and 74. To open a WUTM Unit Trust ISA, the criteria is similar – except there’s no upper age limit.