The beginning of your investment future

Investing can be daunting. Immediately conjuring images of Wall Street brokers with stocks rising and falling, but it doesn’t have to be. With a little research and advice, you can start your investment future today.

Many people in the UK opt to begin their investment future by investing in a stocks and shares ISA, as it represents an easy and cost effective way to open their investment portfolio. But what is it and what does it involve? Here’s our quick guide to the benefits of a stocks and shares ISA.



ISAs explained

The UK government offers generous tax breaks to encourage people to save their money, with one of the most popular and accessible being an ISA. An ISA or Individual Savings Account isn’t an investment in its own right; it’s easier to think of it as a protective wrapper for your savings, where they are protected from tax.

The different forms of ISAs

There are two different forms of ISAs – cash, and stocks and shares (or investment). A cash ISA operates in the same way as a standard savings account, except that the savings are tax free and there is a limit on the amount you can deposit in each tax year. An investment ISA on the other hand enables you to use your savings to invest. These are higher risk as stocks and shares can fall as well as rise. However, for the investment savvy they offer the chance for much higher returns.

The benefits of an investment ISA

When deciding to invest in a stocks and shares ISA, it’s always advisable to seek specific investment ISA advice. However, the benefit basics are summarised below:

Tax Wrapper

This is a common phrase when discussing the benefits of a stocks and shares ISA. It’s important that you think of an ISA as a wrapper that shelters your investments from the taxman. Within the wrapper you’re able to hold almost any investment you wish. You aren’t required to pay any Capital Gains Tax on any gains you make, as well as nothing on the income. Interest is also paid net.

Higher returns

If you have money to save and invest, there is little reason not to open an ISA. If you’re not paying any tax, you’ll get higher returns.

Very easy to manage

If you wish to make changes to your portfolio it’s simple and easy with all the profits being your own. There’s no need to make complicated Capital Gains Tax calculations or time your sales to try and reduce your tax bill. In fact there’s no need to even declare your ISAs on your tax return. This leaves you with the flexibility to make changes to your holdings to suit your needs.

Investment details

With most Investment ISAs, the range of potential investments is huge, including:

• Securities listed on a recognised stock exchange
• Government bonds
• Corporate bonds
• Permanent interest bearing shares
• Exchange traded funds
• Exchange traded commodities

ISA allowance

During the 2012/13 tax year, you can invest a total of £11,280 into your stocks and shares ISA.

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