5 myths about Stocks and Shares ISAs
We dispel five common myths about Stocks and Shares ISAs.
Last Updated: 16 March 2023
ISAs have always been a great option for helping to shelter your money from UK tax.
But with different types of ISA available and rule changes over the years, some common misconceptions still exist about Stocks and Shares ISAs.
If you’re considering whether or not to make use of this year’s £20,000 ISA allowance, we’ve dispelled five recurring stocks and shares ISA myths.
This isn’t personal advice – if you’re not sure ISAs are right for you, you should ask for financial advice. Remember tax rules can change and benefits depend on individual circumstances.
Myth #1: You can only pay into one type of ISA each year
For example, if you wanted to divide your ISA allowance between cash and investments, you could put £15,000 in a Stocks and Shares ISA and the remaining £5,000 in a Cash ISA.
Separate from the £20,000 ISA allowance, it’s also possible to pay up to £9,000 into a Junior ISA for a child.
While you can split your ISA allowance across different types of ISA, you can’t pay into more than one of the same type of ISA in the same tax year. So you couldn’t, for example, pay into a Stocks and Shares ISA with two different providers in the same tax year.
Myth #2: You need a lot of money to get started
It’s a common misconception that you need huge sums of money to start investing.
While the minimum you need to start your Stocks and Shares ISA will vary between different providers, you certainly don’t need to be a millionaire.
With the HL Stocks and Shares ISA, you can get going with £100 as a lump sum or from just £25 a month through Direct Debit.
Myth #3: You need to decide where to invest straight away
This isn’t the case.
Any money you pay into a Stocks and Shares ISA can be held as cash, then invested when you’re ready. Cash in a Stocks and Shares ISA shouldn’t be thought of as a long-term option, as you’re unlikely to earn much interest. But it can be a useful solution while you’re choosing what to invest in.
There’s often a lot to think about when it comes to making investment decisions, so securing your ISA allowance with cash as soon as possible gives you time to do your research.
By learning more about topics like risk and diversification, you can give yourself a better chance of success over the long term. Remember unlike cash, investments fall as well as rise in value – you could get back less than you put in.
Myth #4: You can’t take your money out
Stocks and Shares ISAs are designed for long-term investing – we usually suggest a horizon of at least five years.
But there are times you might want to withdraw money from your ISA, and you can do this at any time.
With the HL Stocks and Shares ISA, there's no charge for withdrawing money. Though there might be charges for selling some investments, depending on what you hold.
Just remember that if you take money out of your HL Stocks and Shares ISA, it will lose its ISA status. Adding the money back into your ISA would count as a new subscription.
Myth #5: You need to keep your Stocks and Shares ISA in the same place forever
There are a couple of parts to this final ISA myth.
One misconception is that you’re stuck with the bank or investment provider you open your Stocks and Shares ISA with. This isn’t the case – you can transfer between different providers, without losing your ISA status. You can also move your money between a Stocks and Shares ISA and a Cash ISA, and vice versa. If you’re considering transferring, check whether your current provider will charge you exit fees.
It’s also important to know that if you choose to invest in a Stocks and Shares ISA, you have the flexibility to buy and sell different investments over time. While investing should be for the long term, it doesn’t mean you can’t chop and change investments when needed.
If your attitude to risk changes, or you simply spot a new opportunity, you shouldn’t feel locked in. As long as the provider you choose offers a range of investments, you’re free to make your own decisions.