Investment is a great means to increase your savings. Sometimes when it comes to investment due to tax reasons such as submitting a self-assessment at the end of the year, or going through hiring an accountant it might put you off.
If tax is the reason that you are not moving forward with investment, then one of the most attractive options is the Stocks and Shares Individual Savings Account (ISA) due to its tax free nature.
What is a Stocks and Shares ISA?
Individual Savings Account (ISA), allows you as a UK citizen to invest in the stock market tax free, for example: if you make a profit of £10,000 it is completely tax free. You don’t need to pay any tax on it.
You must be a UK citizen living in the UK and above 18 years old to gain the tax free advantage.
However, there are a few restrictions on it.One major restriction is that you can only invest up-to £20,000 on each tax year.
So in 2023 to 2024 = £20,000 and 2024 to 2025 = £20,000.
If you are new to stock investing, it is a good amount to start. However, if you are looking into investing more than £20,000 then the ISA will not apply to you.
Note: You can invest any amount of money at any period of time until the end of the tax year and the total amount should be less than £20,000.
How to Invest in a Stocks and Shares ISA
Similar to a normal investment account, you can open an ISA account. Since, ISA only applies to UK residents foreign trading platforms might not offer an ISA account. Any FCA regulated platform that offers an ISA account should be good.
For example the below are few investment platforms that offer ISA stock investment:
- Hargreaves Lansdown: A well known investing service that offers Financial advice as-well.
- Interactive Investor: Known for its flat fee structure, which can be beneficial for longer term.
- IG: Known for its reputation as one of the best trading platforms. IG offers ISA investment.
- Freetrade:A trading mobile app, which due to their easy to use interface is popular in the UK.
Please note: have a look at the bank where your salary is deposited. Usually banks offer reduced commission or unique services if you use their platform for ISA investment.
Key points to look out for in a good platform
Based upon our experience, these 5 points are worth taking into consideration when deciding a platform:
- Fees: how much commission do they charge for each stock purchase. Sometimes platforms have a commission charge but offer a wider portfolio. It is a good strategy to look into what stocks they offer and the commission rate before committing to the platform.
- Investment Options: do they accept direct debit, what source of transaction do they accept? Every investment platform accepts Card however when it comes to withdrawing some have certain restrictions. (Look into the withdrawing conditions)
- Customer Service: Do you have to be in a queue to speak with customer support? It is a good practice to find out how supportive the customer support of a platform is.
- Platform device support: Can you access the platform over mobile/desktop. How complex is the user interface? Some trading platforms have complex UI targeting professional traders and some are tailored towards beginners. It is always a good idea to try out using a demo account.
What should I invest with ISA?
The stocks you choose to invest in will depend on your research and analysis. The portfolio of stocks that appear under an ISA account type depends on the platform you are trading. If you are not familiar with any stocks, websites such as Infinitypp can be beneficial or Bloomberg.
Few key hints
- Start Early: The sooner you start investing, the more time your money has to grow.
- Diversify: Spread your investments across different asset classes to manage risk.
- Stay Informed: By reading financial news, signing up for market alerts is a great way to follow up the market.
- Be Patient: Investment has losses, it takes time to make profit. Set a budget and be patient. Review the stock you have incurred losses and keep track of what you invest using a excel sheet. This is simply because you might use different brokers.
- Investment comes with risk: While investment with a tax free on capital gain might sound appealing like every other investment it also comes with risks.
If you have not looked into ISA investment, this is a great time to research more about it. You can start with a very low investment and see how it goes. It is never too late to invest and with the yearly limit there is always time to explore.
Please note: every investment comes with a risk of losing money. Always take the loss factor into consideration
