Stocks & Shares ISA: how does it work, 2019/20 limit, how to invest, fees, cheapest providers and more

Updated on 05 April 2019 | 0 Comments

Stocks and Shares ISAs can offer inflation-busting returns (provided you're happy with risk). Here's a look at how they work, annual allowances, fees to watch out for and more.

With inflation at 1.9%, a Stocks and Shares ISA can be an attractive option if you want to ensure your money isn't eroded by the rising cost of living.

Over the long term, stock market average returns of around 7.5%, keeping you well ahead of inflation.

Now, of course, your returns will depend greatly on your specific investment strategy and your appetite to risk but, long-term, the stock market is generally a good option for growing your savings compared to Cash ISAs.

According to AJ Bell, On a £10,000 ISA pot, after 10 years the investment would have grown to £18,771, assuming 7.5% annual return and 1% charges.

In that same period, the cash account with a 1.5% interest rate and a £10,000 initial investment would have been turned into just £11,605. After 20 years the difference between the two pots would be £21,768.

While past performance is no indication of future returns, it does make a fairly strong case for opening up an investment ISA.

Here, we explain everything you need to know about this type of ISA. Read on to see if it's right for you.

This article is part of a wider series on investing, covering all areas from stocks and shares to buy-to-let, peer-to-peer and alternative investments. Click here to view the full guide.

Why choose a Stocks & Shares ISA?

Like the Cash ISA, whatever profit you make is free of tax. 

If the idea of putting money on the stock market is likely to give you sleepless nights, then you can probably conclude Stocks and Shares ISAs are not your cup of tea.

Any investment you make should really be long-term and held for a minimum of five to 10 years. ISAs are definitely not about timing the market. If you think you'll need the money sooner, you should stick to cash.

A Stocks and Shares ISA could be an alternative or supplement to a pension. For one thing, you can draw the money earlier than you can from a pension. You can also take income from it along the way.

Head this way to learn more about how Stocks & Shares ISAs differ from their Cash counterparts.

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ISA limits

For the current 2019/20 tax year you can hold up to £20,000 in stocks and shares, cash or a mixture of both. 

You can also transfer from investments into cash and vice versa.

Where to apply for your Stocks & Shares ISA

You can buy a Stocks and Shares ISA from an online investment platform, stockbroker, bank/building society, a fund manager or an independent financial adviser or financial planner.

In the past, investment platforms were known as fund supermarkets, where you could only invest in investment funds.

Now you can buy the full range of investments offered under the Stocks and Shares ISA umbrella. They are arguably the easiest way to invest if you want to go down the 'DIY' route and pick your investments yourself.

Some of the most popular platforms include Hargreaves Lansdown, Fidelity, and BestInvest. You can read more on how they work in Beginner's guide to investment platforms.

Popular robo-investment platforms include Nutmeg and Moneybox.

You can also compare their ISAs in our investment centre.


While Stocks and Shares ISAs are essentially tax-free, you will have to pay a variety of charges, depending on which investment option(s) you go for and where you invest.

The DIY option via an investment platform or stockbroker is generally cheapest. On platforms, these can range from management charges to charges for buying or selling shares to exit fees.

Regulation changes mean that platforms can no longer accept commission payments for selling funds to customers, instead charging directly for the services they use. Investors now pay two separate fees: a fund management charge, and a platform charge.

These non-commission-based funds are referred to as 'clean' funds.

Previously, investors would pay 1.5% in fund management fees with no explicit platform fee – half of it would go to the fund manager, with the rest split between the platform and the distributor of the fund, making it hard for investors to tell who they were paying and how much.

You should make sure you understand and compare these before you invest so you don’t end up paying out more than you need to.

However, it’s important to not just rely on headline rates, as the total amount that will be creamed off your investments each year will also depend on the individual fund management fees of the funds that you choose to invest in.

You should also think about what type of investments you will be buying, how frequently you might buy and/or sell, and the size of your portfolio. That is also a key factor in whether you go with a platform or a stockbroker.

Another thing to bear in mind is customer service. Do you want to be able to speak to someone on the end of a phone easily?

Or would you prefer to speak to an adviser in person, bearing in mind this will be the most expensive option?

If you really want to keep costs to a minimum, consider using a 'robo investor'.

These are online platforms that use an algorithm to manage your investments, rather than an actual person. If you want to learn more, take a look at our guide to robo investing and see what you can expect to save in terms of fees.

If you want to learn more about the charges you can expect to pay, have a look at our comprehensive breakdown of investment ISA charges.

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What you can put in a Stocks & Shares ISA

Now have a read of our guides to some of the different types of investment you can put into a Stocks and Shares ISA, including how they work, and the charges to be aware of:

There are also Self-Select ISAs, where you pick all the shares and other investments yourself.

Experts often talk about the importance of diversification, i.e. having a mixture of investments.

A couple of index trackers might be fine to start off with, but you should think about keeping some money in cash, as well as balancing your risk with some bonds.

Although, ultimately, what you choose will very much depend on your attitude to risk.

If you want to learn more about making a success of investing, have a read of this stock market millionaire's top tips.

Ultimately, if you decide you don't want the risk and would rather stick to savings, have a read of our comprehensive round up of the best savings accounts on offer.

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This article has been updated


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