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Why 2.8 million people saved into a Stocks and Shares ISA in the 2017/18 tax year

We look at the reasons behind ISAs continued popularity.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Joel Lewis
ISA Account Manager

Published on 25 March 2020

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

When you think about investing, it’s understandable that your first thought might be which investments to choose. But how you hold them can have a huge impact on your returns.

That’s why investing in a tax-efficient account like an Individual Savings Account (ISA) could be a great decision for any investor to consider. And why an estimated 2.8 million investors chose to invest in a Stocks and Shares ISA in the 2017/18 tax year alone.

We look at some of the key benefits of investing in one of the most popular tax-efficient accounts.

This article isn’t personal advice. Tax rules can change and the benefits of investing in ISAs will depend on your circumstances. If you’re unsure of the suitability of an investment for your circumstances, please ask for advice.

Discover more about ISAs

1. Save tax

Great tax benefits is the most obvious perk – it’s what ISAs are known for.

Stocks and Shares ISAs offer the opportunity to grow your money free from UK income and capital gains tax. So if your investments go up in value, you won’t have to pay capital gains tax. And if your investments give you any income, you won’t pay UK income tax either.

The tax benefits saving you money, could mean you get higher returns overall.

2. You can take money out whenever you like

Whatever your financial goals and although investing is for the long-term, there will be times when you want to access your money, such as for a deposit for a new home, an unexpected bill or even some help with retirement.

Unlike some other tax efficient accounts, a Stocks and Shares ISA gives you flexibility. Whether you’re investing for 5, 10, 20 years or even longer, you can get hold of your money if and when you need it.

3. An allowance that’s bigger than ever

When ISAs (formerly known as PEPs) launched in 1987, you could only contribute a maximum of £2,400 that year.

Over the years, the ISA allowance has risen significantly. This tax year you can put £20,000 into ISAs and shelter your money from tax immediately.

Those who started investing in ISAs from the beginning have really benefited. If you contributed the maximum amount to ISAs each year (using the full allowance) since they had started, you could have sheltered over £320,000 so far.

And when you start to think about investment growth on top of that, it’s no surprise that we have many clients with ISAs worth over £1,000,000.

Of course, there aren’t any guarantees. Investments can fall as well as rise in value, so you could get back less than you put in.

How much could your ISA be worth?

4. Focus on investment decisions too, not just tax decisions

Sometimes investors might be reluctant to sell an investment because of capital gains tax on their profits. This can lead to poor and often costly financial decisions.

ISAs allow you to make investment decisions free from the burden of tax.

Investments in your Stocks and Shares ISA are free from capital gains tax and UK income tax. You can buy and sell investments whenever you want to without worrying about some of the tax implications.

5. Simplify your finances

Every year, millions of people are tasked with completing their personal tax return before the 31 January deadline. Over one million people missed the deadline this year and are likely to receive a fine from the government for late payments.

Investing in a Stocks and Shares ISA means you’ve got one less thing to worry about. As your investments are sheltered from tax, you don’t need to declare ISA investments on your tax return, making your life just that little bit easier.

Open or top your ISA before 5 April

The tax year ends on 5 April so time is running out to open your ISA for this tax year.

But don’t worry, starting your HL Stocks and Shares ISA is quick and easy, and once you’ve read all the important information, it takes minutes online.

If you’re a client, you can also top up your ISA via our smartphone app.

Find out more about the HL Stocks and Shares ISA

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