• Tom Parson , Manager at Finance affairs


• 20.11.2019 12:30 pm
Stocks , ISAs

Many of us are familiar with the tax-free benefits associated with a standard Individual Savings Account (ISA). However, a variant known as a stocks and shares ISA is becoming an increasingly popular alternative. What is the basic principle behind a stocks and shares ISA and what unique advantages do they offer? If you have been curious to learn more about one-of-a-kind investment opportunities, the information below should prove to be quite interesting.

What is a Stocks and Shares ISA?

As the name suggests, this type of ISA allows you to allocate your funds into various types of investments (unit trusts, blue-chip holdings and government bonds are a handful of common examples). This is an excellent prospect for those who have been looking to augment their savings and enjoy higher returns than those normally associated with a standard cash ISA.

All About Tax Advantages

Many will argue that the main benefit of a stocks and shares ISA is the fact that any investment returns will not be subject to capital gains tax. Keep in mind that this is still the case even if profit margins exceed the ISA allowance for the year in question. Those who invest outside of a stocks and shares ISA would otherwise be required to pay ten per cent if they exceeded the capital gains tax allowance of £12,000 pounds. In other words, anyone who expects to realise annual gains of more than £12,000 pounds will be able to reap the benefits associated with a stocks and shares ISA.

The Possibility of Lucrative Dividends

Certain investments such as blue-chip stocks and unit trusts offer shareholders the chance to accrue dividends. These dividends are excellent ways to enjoy a higher return on investment (ROI) and they can represent welcome sources of additional liquidity. Current regulations stipulate that investors can earn up to £2,000 pounds before they will be subject to capital gains tax. This figure increases to £5,000 pounds for those who invested between 2016 and 2018. On a final note, any holdings which remain tied into a stock offering dividend will avoid capital gains tax entirely; an excellent way to build a fiscal "nest egg" over time.

A Plethora of Investment Options to Leverage

Many individuals will become involved with a stocks and shares ISA based upon the available investment possibilities. As the portfolio associated with these ISAs is often slightly conservative in nature, it can be a welcome alternative for those who are unwilling or unable to keep up with open-market fluctuations. Many ISAs likewise offer dedicated wealth management specialists who are able to provide further guidance in accordance with the unique needs of the account holder.

Boasting a wealth of tax advantages as well as a diverse range of investment opportunities, stocks and shares ISAs are extremely useful financial vehicles to keep in mind. Those who are curious to learn more about their options are therefore encouraged to speak with a qualified adviser at their convenience.

Moneyfarm offer a fully managed portfolio for investment experts where all you have to do is pick when and how much to invest. With no extra costs for transferring your ISA it is a simple cost-effective stocks and shares ISA account which provides great flexibility, investing in a diverse range of assets based on your investor profile. Using the app, you can analyse performance and how much you’re paying and what your money is being invested in.