What is a stocks and shares ISA?
A stocks and shares ISA holds investments — funds, shares, bonds and investment trusts — with returns free of UK capital gains tax and no further tax on dividends. Values can fall as well as rise, so it suits money you can leave invested for the medium to long term.
It draws on the same £20,000 allowance as every other ISA. Gains and income need no reporting on a tax return, which is a real administrative benefit as unwrapped allowances have shrunk.
Transfers between providers are possible without losing the wrapper — the key point being to use the provider's transfer process rather than withdrawing and re-subscribing, which uses up allowance.
A change is coming for uninvested cash held inside a stocks and shares ISA, which will attract a charge on the interest from April 2027. Anyone holding a large cash balance inside an investment wrapper should look at it before then.