What is a Stocks and Shares ISA?

A Stocks and Shares ISA is a type of Individual Savings Account designed to help you grow your money over the long term while keeping it tax-efficient. Unlike a Cash ISA, where your savings earn a fixed or variable interest rate, a Stocks and Shares ISA invests in shares, bonds, funds, and other assets, giving your money the potential to grow faster.

The main advantage? Any income or gains you make inside the ISA are free from UK Income Tax and Capital Gains Tax. This makes it a popular choice for people looking to invest for the future in a tax-smart way.

Like any investment, the value of a Stocks and Shares ISA can rise and fall, so there’s a chance you could get back less than you put in. Because of this, they’re generally best for people who are happy to leave their money invested for the long term, to ride out any market fluctuations, and are comfortable with a level of risk.

How does a Stocks and Shares ISA work?

When you put money into a Stocks and Shares ISA, it is invested in a range of assets. You can either choose your own investments, such as individual company shares or bonds, or use ready-made portfolios provided by investment platforms including building societies, banks and mutuals.

The value of your Stocks and Shares ISA depends on the performance of these investments, which means it can go up or down. Because of this, Stocks and Shares ISAs are generally best suited to medium- to long-term goals, typically five years or more. Over time, your investments have a chance to grow, but there’s no guarantee of returns.

Who is eligible for a Stocks and Shares ISA?

To open a Stocks and Shares ISA, you need to:

• Be a UK resident: You must live in the UK for tax purposes.
• Be aged 18 or over: This is the minimum age to open a Stocks and Shares ISA.
• Have a valid National Insurance number: You’ll need this when applying.

You can pay into more than one ISA per tax year as long as your total payments stay within the annual £20,000 ISA allowance across all ISA types.

If you move abroad, you can usually keep your existing ISA open, however we recommend informing your ISA provider. You won’t be able to add any new money until you’re a UK resident again (unless you are a Crown employee serving overseas or their spouse or civil partner).

Can I contribute to an ISA for someone else?

In most cases, ISAs are individual accounts, which means only the account holder can make contributions.

You cannot pay directly into someone else’s ISA; it has to be in your name.

However, Junior ISAs are an exception. While only a parent or legal guardian can open the account, anyone can pay in (up to the Junior ISA allowance) once its open.

So, while you can’t directly fund another adult’s ISA, you can help set up a Junior ISA or give money to a loved one for them to invest in their own ISA.

How much can I pay into a Stocks and Shares ISA?

Each tax year (6 April – 5 April), you can invest up to £20,000 across all your ISAs. This is known as your ISA allowance. You can split this across different types of ISAs, including Cash ISAs, Stocks and Shares ISAs or Lifetime ISAs, but the total must not exceed £20,000.

Your allowance is based on how much you pay in, not the value of your investments. So if your investments fall in value, you cannot pay more to make up for the loss; it’s strictly the contributions that count toward your limit.

The benefits of a Stocks and Shares ISA

A Stocks and Shares ISA is a great way to grow your money while keeping things tax-efficient. Here’s why many people choose them:

• Tax-free growth: Any money your investments make, whether from dividends, interest, or capital gains, is completely free from Income Tax and Capital Gains Tax. That means more of your money stays yours.
• Flexibility: You can usually access your money whenever you need it (some providers may set limits), making it a more flexible option than some long-term investments, like a fixed rate bond.
• Choice of investments: Stocks and Shares ISAs let you invest in a wide range of assets, from company shares to bonds and managed funds. Some providers let you build your own portfolio or you can go for a ready-made option such as the Unity Mutual Stocks and Shares Flexible ISA that invests in our Equity Fund.
• Long-term growth potential: Over time, investments can grow faster than a Cash ISA because of compounding interest, dividends, and market growth. While there are no guarantees, keeping your money invested for the long term increases the chance of higher returns.
• Easy introduction to investing: Even if you’re new to investing, you can start small and learn as you go. Many providers offer managed portfolios to help you get started.

A Stocks and Shares ISA is a good option for those looking to grow their savings over time while benefiting from tax advantages and flexibility, and that understand the risks.

The risks of a Stocks and Shares ISA

While Stocks and Shares ISAs can be a great way to grow your money, it’s important to remember that they come with some risks. Here’s what to keep in mind:

• Value can go up and down: The investments inside your ISA are linked to the stock market and other financial markets. This means the value of your ISA can rise, but it can also fall, and you might get back less than you put in.
• Market volatility: Short-term changes in the market can affect your investments, which is why Stocks and Shares ISAs are generally best suited for medium- to long-term investing.
• No guaranteed returns: Unlike a Cash ISA, your capital isn’t protected. There’s no fixed interest; your returns depend on how your investments perform.
• Fees: Platform fees, fund management fees, and trading costs can reduce your overall returns. It’s important to understand these before investing.
• Risk vs. your personal situation: If you might need access to your money quickly or are uncomfortable with fluctuations in value, a Stocks and Shares ISA may not be the right choice.

While there’s potential for higher growth, it’s important to weigh these risks and only invest money you’re happy to leave invested for the long term.

Stocks and Shares ISA fees

Fees can vary depending on the platform or investment type, but common charges include:

• Platform fee – Paid to the provider for managing your account.
• Fund management fee – Charged by fund manager for handling the investments within the fund.
• Trading fees – Some platforms charge for buying or selling shares.

Even small fees can reduce long-term returns, so it’s important to compare providers before investing.

How much does it cost to invest in a Stocks and Shares ISA?

The cost depends on the provider and the type of investments you choose. For example:

• DIY investments in shares may involve trading fees each time you buy or sell.
• Managed portfolios typically charge platform fees and fund management fees.
• Some providers also offer fee-free accounts up to a certain investment limit.

It’s worth reviewing all fees upfront to make sure your investment strategy remains cost-effective.

Different types of ISA

Not all ISAs are the same. Depending on your goals, investment timeline, and comfort with risk, some may suit you better than others. The table below gives a quick overview of the main ISA types, their tax benefits, level of risk, accessibility, and who they’re best for.

For a full breakdown of the different types of ISAs on offer and to determine which would be best for you, take a look at our ISA comparison below:

Can I have more than one ISA?

Yes. You can have more than one ISA. While contribution limits can change each year, you can currently invest up to £20,000 into ISAs for 2025-2026.

You might want to balance the risk of a Stocks and Shares ISA with a Cash ISA, or you could be saving in a Lifetime ISA for your first home and want to maximise your ISA allowance. While HMRC sets contribution limits, you can split your allowance across different types of ISAs.

ISA Allowance Example

With a £20,000 ISA allowance, you could save:

• £10,000 in a Stocks and Shares ISA
• £4,000 in a Lifetime ISA
• and £6,000 in a Cash ISA

Great news for anyone thinking about opening a Stocks and Shares ISA and maximising their tax benefits. You won’t pay any income tax on dividends or interest earned. You also won’t need to pay any capital gains tax if you make a gain when you sell your investments.

Flexible ISA vs normal Stocks and Shares ISAs

While all Stocks and Shares ISAs allow you to invest tax-efficiently, not all of them offer the same level of flexibility.

A non-flexible Stocks and Shares ISA works on a simple “once it’s in, it’s in” basis. If you withdraw money during the tax year, that amount still counts towards your annual ISA allowance, even if you pay it back in later. For example, if you invest £10,000, withdraw £2,000, and then add another £2,000, you’ve technically used £12,000 of your £20,000 allowance.

A Stocks and Shares Flexible ISA, on the other hand, gives you a lot more freedom. With a flexible ISA, you can withdraw money and replace it within the same tax year without it affecting your annual allowance. This means you can access your funds when you need to, and still make the most of your full tax-free allowance.

This added flexibility makes it ideal if you want the benefits of long-term investing but also like the reassurance of being able to access your money when needed.

At Unity Mutual, our Stocks and Shares Flexible ISA combines that flexibility with tax efficiency and a managed fund, helping you make your money work harder, without locking it away.

Should I invest in a Stocks and Shares ISA?

A Stocks and Shares ISA can be a smart choice if you want your money to grow over time and are comfortable with the ups and downs of the market.

Before deciding, it’s worth considering:

• How long you can leave your money invested – Stocks and Shares ISAs work best for medium- to long-term investing.
• Your comfort level with risk – Investment values can go up and down, and you could get back less than you put in.
• Your financial situation – Make sure any high-interest debts or emergency savings are taken care of first.

If you’re unsure, speaking to a regulated financial adviser (unbiased.co.uk) or using a managed ISA option can help you make confident choices.

You can also talk to our friendly team by calling us on 0161 214 4650. While we can’t advise whether a Stocks and Shares ISA is right for you, we’re happy to provide clear, factual information and explain how the product works.

Terms and conditions apply.