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Freetrade ReviewHow to Open a Stocks and Shares ISA
Written by Elizabeth Anderson
Fact-checked by Steven Hatzakis
Edited by Jeff Anberg
A stocks and shares ISA offers the potential to grow your long-term savings at a higher rate than inflation. You won’t have to worry about tax – ISAs are tax-free – so a stocks and shares ISA should be your first account of choice when investing as long as you have not already gone over the £20,000 annual ISA allowance.
It’s easy to get started; you can invest from just a few pounds and some platforms don’t charge any trading fees. I’ve held a few stocks and shares ISAs over the years and pay a set amount into one each month through a standing order. It’s a great way to grow long-term savings tax-free, and this article explains the key features of stocks and shares ISAs.
What is a stocks and shares ISA?
A stocks and shares ISA allows you to invest your money in the stock market for the possibility of greater returns than a cash ISA. While cash ISAs pay a set interest rate that is typically lower than inflation, with a stocks and shares ISA there are no limits to the return you could make if your investments perform well.
What is an ISA?
ISAs are a type of tax-free savings account, meaning any growth on your investments will be free of capital gains tax, income tax, and dividend tax. For a run down on every type of ISA, visit my complete guide to ISAs in the UK.
However, there are no guarantees when it comes to investing. You could lose money if you withdraw your savings at a time when markets are down or you could simply choose an investment that does not perform well.
The best way to reduce your risk is to invest for the long term – at least three to five years or more. This allows your money to ride out the ups and downs of the stock market. You could also choose a diversified fund that invests in tens or hundreds of companies – as opposed to selecting individual stocks yourself.
Through a stocks and shares ISA, also called an investment ISA, you can invest in a range of investments, such as stocks, mutual funds, ETFs, investment trusts, and bonds. Many platforms even offer ready-made portfolios so you don’t have to worry about choosing your own investments.
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Benefits of opening a stocks and shares ISA
The benefits of opening a stocks and shares ISA are that you can invest in the stock market through a tax-free wrapper. You have the potential to boost your long-term savings by investing in global companies or assets.
If you want to take money out of your ISA further down the line, it will be tax-free. It is common for people who have retired to use ISAs to top up their income tax-free, alongside their pensions.
How to open a stocks and shares ISA step-by-step
It’s easy to open a stocks and shares ISA. Below I explain the key steps.
- Gather important financial information such as your national insurance number, bank account details, and debit card details if you are paying money in by using your card.
- Compare investment platforms and check out our U.K. share dealer reviews.
- Go to the website of your chosen provider.
- Select the ‘open ISA’ option.
- Fill in information about yourself. This may include: full name, date of birth, email address, home address, national insurance number, mobile number, nationality, and confirmation that you are a UK resident.
- Agree to the terms and conditions.
- Fund your account.
- Choose your investments.
- If you are transferring an ISA, follow the above steps with your new, chosen provider and select ‘transfer’ either at the start or at the final stage.
What type of trader are you?
New to the world of investing? See my picks for the best UK trading platforms for beginners. More experienced traders should check out my guide to the best UK Trading Platforms for Active Traders. If you're looking to trade shares on the go, read my guide to the best UK stock trading apps.
Choosing the right stocks and shares ISA provider
There is a wide range of stocks and shares providers in the U.K., offered by both investment platforms and high-street banks. Here are a couple of things to consider when choosing a stocks and shares ISA.
Where to invest your money. If you are a beginner investor, you may want to choose a stocks and shares ISA that offers ready-made investment portfolios. On the other hand, if you’re happy selecting your investments, you’ll probably want to choose a platform that offers a wide range of investments, such as funds, bonds, and stocks.
Costs, charges, and fees. You’ll want to think carefully about fees when choosing your ISA. If you are investing a small amount, then a provider that charges percentage-based fees will likely work out cheaper for you than a provider that charges a flat monthly fee.
It’s OK to keep it simple.
You don’t need to choose complicated investments for your stocks and shares ISA. A global fund that invests or tracks companies worldwide may be enough to get you started. These are offered by most providers.
My recommended stocks and shares ISAs
I’ve held a few stocks and shares ISAs over the years; I’ve found it to be a great way to grow savings tax-free. Check out some recommendations to get started, or head over to my guide to the best stocks and shares ISAs.
Trading 212
Trading 212’s ISA is free to hold and there are no trading charges. This makes Trading 212’s stocks and shares ISA a great option for those investing small amounts or large amounts. Mutual funds are not offered, but you can invest in a diversified ETF.
AJ Bell
AJ Bell offers a wide choice of investments, from funds and bonds to stocks and ETFs, as well as ready-made portfolios. Account charges are 0.25% a year or lower, on top of costs for each investment.
Vanguard
Vanguard has a limited range of investments, as you can only invest in Vanguard funds. It is a great option for newer investors or those looking to take a hands-off approach, and fees are low – typically less than 0.5% a year with everything included.
Hargreaves Lansdown
Hargreaves Lansdown is the U.K.’s largest DIY investment platform. There is a wide range of investment options, including ready-made portfolios. It has a great mobile app, research materials and investing guides.
Freetrade
If you have a larger amount of money to invest - perhaps more than £30,000 - Freetrade could be worth considering. Freetrade’s ISA costs £5.99 a month, but there are no dealing fees. You can invest in U.K., U.S. and European stocks, ETFs and investment trusts.
CMC Invest
If you have more than £50,000 to invest, then CMC Invest could be another flat-fee broker worth considering. CMC Invest’s ISA costs £10 a month, but there are no dealing fees. It offers a wider range of investments than Freetrade and Trading 212. The first three months are free.
Looking for more options?
For an even deeper look into the providers that I would recommend, check out my full guide on the best stock and shares ISAs.
Types of investments available
There are many investments you can hold in your stocks and shares ISA.
These include:
- Company stocks
- Mutual funds
- Exchange-traded funds (ETFs)
- Investment trusts
- Bonds
- Cash (some investment platforms will pay interest on your cash)
The investments you choose will depend on your risk appetite and how long you plan to invest in your portfolio. Selecting individual company stocks is perhaps the most risky strategy. If you put all your money in one company that later goes bust, you could lose everything. Many investors play it safer by investing in a mutual fund, ETF, or investment trust that invests in a range of companies to increase diversification.
Maximizing your ISA allowance
Be aware there is a limit to how much you can pay into ISAs each year: £20,000 per adult. Make sure you invest up to this limit as much as possible - once the tax year has passed any unused allowance is lost.
The tax year runs from 6 April to 5 April each year.
If you are married or in a civil partnership, consider using your spouse’s allowance too as you have a total household ISA allowance of £40,000 a year.
FAQs
Can you have a cash ISA and a stocks and shares ISA?
Yes, you can have both a cash ISA and a stocks and shares ISA. You can hold, or pay into, multiple accounts at the same time. For more information, check out my complete guide to ISAs in the UK.
How many stocks and shares ISAs can I have?
There is no limit to how many stocks and shares ISAs you can have. It used to be the case that you could only pay into one each tax year. But as of April 2024, the rules have relaxed and you can now pay into multiple investment ISAs each year.
How do taxes work with a stocks and shares ISA?
There are no taxes to consider with stocks and shares ISAs. That’s what makes them such a great savings product. Any money that’s made in the ISA through growth or dividend income is entirely tax-free. All withdrawals are tax-free as well.
What is the best stocks and shares ISA in the UK?
My pick for the best all-round stocks and shares ISA for most people is the offering from Trading 212. That said, there is no easy or universal answer to this question as much depends on your own trading and saving goals. Many investment platforms offer stocks and shares ISAs and they all provide a great experience.
When looking at the best one for you, think about where you want to invest, how confident you are at selecting your own investments, customer support, and the mobile app experience. Also, consider fees and whether you would be better off paying a percentage fee or a flat annual or monthly fee. Check out our full guide to the best stocks and shares ISAs for more options and to help find the right one for you.
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About the Editorial Team
Elizabeth Anderson, lead writer and researcher, has been a financial journalist for more than a decade. In addition to her work with UK.StockBrokers.com, she has written extensively for major publications including BBC, The Times and Bloomberg. A keen investor herself, she is passionate about helping people understand finance and investing.
Steven Hatzakis is the Global Director of Research for ForexBrokers.com. Steven previously served as an Editor for Finance Magnates, where he authored over 1,000 published articles about the online finance industry. Steven is an active fintech and crypto industry researcher and advises blockchain companies at the board level. Over the past 20 years, Steven has held numerous positions within the international forex markets, from writing to consulting to serving as a registered commodity futures representative.
Jeff Anberg is a Staff Editor at UK.StockBrokers.com. Along with years of experience in media distribution at a global newsroom, Jeff has a versatile knowledge base encompassing the technology and financial markets. He is a long-time active investor and engages in research on emerging markets like cryptocurrency. Jeff holds a Bachelor’s Degree in English Literature with a minor in Philosophy from San Francisco State University.