What is a Stocks and Shares ISA?

A Stocks and Shares ISA (Individual Savings Account) is an investment account that lets you invest in assets like funds, shares and exchange traded funds (ETFs) while sheltering your investments from UK income tax and capital gains tax.

Bear in mind, ISA and tax rules can change, and the benefits available to you will depend on your individual circumstances. This article isn’t personal advice. If you aren’t sure if an investment or course of action is right for you, please speak to a financial adviser.

How does a Stocks and Shares ISA work?

First, you pay money into your ISA. You can invest up to £20,000 during the 2026/27 tax year. Then, decide how you'd like it invested.

You can choose ready-made investments, where professionals manage and diversify your investments for you. You just check in with them to ensure they remain aligned with your goals, or you can build and manage your portfolio yourself.

Depending on what your provider offers, you can invest in a range of assets, including funds, shares, bonds, ETFs, and investment trusts.

Your money will remain invested in your ISA so long as you don’t make any changes.

You can buy, sell and switch investments whenever you want within the ISA. Keep in mind your financial goals before withdrawing cash, and that keeping money invested for longer can help smooth out short-term market fluctuations. Plus, any dividends or other investment income earned from investments held in a Stocks and Shares ISA are sheltered from UK income tax.

But while you can withdraw money whenever you want, investing for at least five years is recommended – investments can be volatile in the short term, but can be more stable over longer periods.

You're eligible for a Stocks and Shares ISA if you're:

  • 18 or over

  • A UK resident for tax purposes, or a Crown Servant (for example, a diplomat or civil servant), or their spouse or civil partner, if you do not live in the UK.

How much can you pay into a Stocks and Shares ISA?

You can pay up to £20,000 into a Stocks and Shares ISA each tax year. This only applies to new contributions, not the total value of your account.

For example, if you invest £20,000 and your investments grow to £25,000, the additional £5,000 stays sheltered within the ISA and doesn't affect your allowance. If later the value falls to £15,000, you won’t get any allowance back.

Also, the allowance applies across all your ISAs. You can put the full amount into a Stocks and Shares ISA, or split it across different ISA types, like a Cash ISA or Lifetime ISA (LISA), though you can only put up to £4,000 per year into a LISA.

If you don't use your allowance before the end of the tax year, you'll normally lose it – it can't be carried over to the next tax year.

What are the ISA changes from April 2027?

From 6 April 2027, the overall annual ISA allowance will remain £20,000. For savers and investors under 65, no more than £12,000 of this can be paid into Cash ISAs. Up to the full £20,000 can still be paid into non-cash ISAs, depending on the overall allowance. Investors aged 65 or over will retain a £20,000 Cash ISA limit.

Read more about the changes here.

While the legislation for these changes is now in place, it's important to keep track of the latest government guidance before making financial decisions.

What can you invest in?

A Stocks and Shares ISA can include a range of investments, such as:

  • funds

  • shares in companies

  • ETFs

  • investment trusts

  • corporate bonds

  • government bonds

  • long-term asset funds

The types of investments available depend on both ISA eligibility rules and your provider. It's worth checking what's available and whether it aligns with your investment objectives and risk tolerance.

What's the difference between a Stocks and Shares ISA and Cash ISA?

Simply put, Stocks and Shares ISAs are designed for investing, while a Cash ISA is intended for saving.

Both form part of your £20,000 ISA allowance which can be held in one ISA or split across multiple different types of ISA. The key difference is risk. Cash ISAs pay interest on cash savings. The interest rate may be fixed or variable, depending on the account.

Stocks and Shares ISAs, on the other hand, offers your money the opportunity to grow through investing. Unlike cash savings, the value of investments and any income from them can fall as well as rise – so you could get back less than you invest.

Read more about Cash ISAs versus Stocks and Shares ISAs.

What are the benefits of a Stocks and Shares ISA?

A Stocks and Shares ISA lets you:

  • grow your money without paying UK income tax or capital gains tax on investments held in the account

  • take advantage of the long-term benefits of investing, which can offer greater growth potential than holding cash, though this isn't guaranteed

  • decide how involved you want to be – from handpicking your own investments to having them managed on your behalf

  • cut paperwork – ISA investments usually don’t need to be included on a UK tax return

  • transfer existing ISA savings and investments between providers without losing their tax-efficient status

  • access your money whenever you want by selling investments and withdrawing cash

It's worth noting that some overseas taxes may still apply, depending on the investments you hold.

What are the risks of a Stocks and Shares ISA?

There are a few risk factors you should know about.

  • The value of investments can go down as well as up, so you could get back less than you invest.

  • Unlike cash savings, investment growth and income are not guaranteed.

  • Investment values can fluctuate due to changes in markets, economies, and investor sentiment.

  • Shares tend to be higher risk than bonds, and different funds hold different levels of risk.

  • If your investments don't grow faster than inflation, the spending power of your money could fall over time.

  • Account, fund and investment charges can impact the overall return you receive.

  • From 6 April 2027, if you've got uninvested cash sitting in your Stocks and Shares ISA, the interest paid on that cash could be subject to a 22% government charge, paid by us as the provider, to HMRC..

  • Restrictions are also planned on non-cash ISA portfolios made up entirely of cash-like investments, such as money market funds.

Due to these risks, you should think of investing as a long-term commitment, for at least five years. Before investing, consider whether you have sufficient emergency savings and whether paying off expensive debt should take priority.

What charges might you pay?

You should expect:

  • platform or account charges

  • fund management charges

  • dealing charges for buying and selling investments

  • foreign exchange charges when investing overseas

  • transaction taxes, like Stamp Duty on some share purchases

  • transfer charges

The charge for holding funds in the HL Stocks and Shares ISA, for example, is no more than 0.35% per year. And our charge for holding shares, bonds, ETFs and investment trusts is 0.35%, capped at £12.50 per month.

Find out more about our charges.

Can you withdraw from a Stocks and Shares ISA?

Yes, you can withdraw from a Stocks and Shares ISA whenever you want to.

However, if your money is invested, you'll usually need to sell some or all of your investments before you can withdraw cash from the account. And the value of those investments may have risen or fallen since you invested.

Some providers offer flexible ISAs. These can let you withdraw money and put it back later in the same tax year without affecting your annual ISA allowance, subject to HMRC rules.

Are Stocks and Shares ISAs safe?

A Stocks and Shares ISA is a tax-efficient account for holding investments in, but the investments within it are not risk-free.

Your investments should be kept separate from your provider’s own assets to protect them in the event the provider fails, and you may be protected by the Financial Services Compensation Scheme (FSCS), subject to eligibility and limits.

However, FSCS protection does not cover investment loss.

For more information, read our guide on the safety of your investments.

How can you choose a provider?

When choosing a provider:

  • Check for account charges, dealing charges, fund charges and any transfer costs – minimum contributions can vary.

  • Make sure you can invest in the types of investments you're looking for, whether that's funds, shares, bonds, ETFs or investment trusts.

  • Consider how confident you are managing your investments yourself. If not, some providers offer professionally managed portfolios or ready-made investments.

  • Consider the level of support available. Investment research, market insights, and planning tools could help you make more informed decisions.

  • Check how easy it is to transfer existing ISAs.

  • Check for any loss of benefits or guarantees before transferring, and whether any exit charges could make the transfer less worthwhile.

Open an HL Stocks and Shares ISA