What is a Stocks and Shares ISA? The basics

If you’re saving for the future, you might be weighing up whether to keep your money in cash or invest it.

A Stocks and Shares ISA lets you invest in things like shares, bonds and funds. The aim is to help your money grow over time all within a simple, tax-efficient account.

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How a Stocks and Shares ISA works

A Stocks and Shares ISA is a type of Individual Savings Account designed for investing. Any growth or income you make is free from UK tax. That’s because your investments sit inside a tax-free ‘wrapper’.

You can pay in up to £20,000 across one or more ISAs in any given tax year (which runs from 6 April to 5 April the following year). And if you don’t use all your ISA allowance in one year, you can’t carry it forward to the next.

Here’s an example.

If you invest £20,000 and your investments grow by 5% over a year, you’d have £21,000. You wouldn’t pay UK tax on that £1,000 gain. Just remember, investments can go down as well as up. So, you could get back less than you invest.

Is a Stocks and Shares ISA right for you?

A Stocks and Shares ISA usually works best if you’re investing for the long term. Markets can rise and fall in the short term. The longer your money stays invested, the more time it has to recover from downturns and potentially grow - although returns aren’t guaranteed.

While you can normally withdraw money from a Stocks and Shares ISA when you need to, the value of your investments will depend on market conditions at the time you sell. That’s why it’s generally not suited to short-term saving.

Getting started

You can open a Stocks and Shares ISA if:

• you’re 18 or over
• you’re a UK resident for tax purposes

Getting started is normally pretty straightforward. Many providers allow you to start investing with a regular monthly contribution, or a lump sum. At Fidelity, you can start investing with as little as £25 per month.

Making your investment choices

When choosing investments for a Stocks and Shares ISA, it’s important to consider the level of risk you’re willing to take, as well as your goals and time horizon.

If you like being hands-on, you can build your own mix of investments. This might include shares, exchange traded funds (ETFs), bonds or investment trusts. Spreading your money across different investments can help manage risk.

If you prefer a simpler approach, you might like to think about investing in a diversified fund. These come with a built-in mix of investments and a clear level of risk.

Fidelity’s Ready-Made ISA is a diversified Stocks & Shares ISA where you pick a fund based on simple preferences and Fidelity’s experts manage the investments for you, offering a low-fuss way to invest. Open your ready-made ISA.

Keeping your ISAs in one place

If you already have ISAs with other providers, you may be able to transfer them to a single provider. This can make it easier to keep track of your investments and, in some cases, may help reduce fees. It can also offer reassurance and make things easier by having everything managed in one place.ISA changes from April 2027

ISA changes from April 2027

The government plans to change ISAs from April 2027. Let’s take a look at what this means for savers and investors:

• Cash ISA allowance change - the overall annual ISA allowance will remain at £20,000. However, the cash ISA allowance for people under 65 would fall to £12,000. Over 65s will still be able to use the full £20,000 ISA allowance in their cash ISA.
• Cash held within Stocks and Shares ISAs - the government wants to prevent people holding cash in a Stocks and Shares ISAs over the long term from earning tax-free interest. It will therefore impose a 22% charge on any interest paid on uninvested cash.
• Money market fund rules - investors will still be able to hold money market funds within a Stocks and Shares ISA and benefit from tax-free returns. However, money market funds will not be able to make up 100% of a portfolio. And if they did, they’d be classed as non-qualifying investments.
• Transfers from Stocks and Shares ISA into a cash ISA - under 65s won’t be allowed to transfer money from a Stocks and Shares ISA into a cash ISA to prevent people getting around the new rules. However, it will still be possible to transfer money in the opposite direction.

The new rules will come into force on 6 April 2027 after a short technical consultation, which is due to be published this summer.  

What’s next?

A Stocks and Shares ISA lets you invest your money while keeping any growth or income free from UK tax. Over five years or more, investments have the potential to grow your money more than cash. But growth isn’t guaranteed, and values can fall as well as rise.

If you’re comfortable investing and happy to think long term, a Stocks and Shares ISA could be a good fit for you. If you’re new to Fidelity, you can open an ISA here. Or, if you already have a Fidelity account, log in to open an ISA.

• Read: Maxing your allowances can make a massive difference
• Read: How long could it take me to save £20k, £50k or £100k?
• Read: What risks come with investing? The basics

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.