What is a stocks and shares ISA?

A stocks and shares ISA is an account, usually with an investment platform, broker or fund manager, that holds investments rather than cash. Money you pay in counts towards your £20,000 ISA allowance for the tax year.

The money is used to buy investments. You choose them yourself, or pick a ready-made option where the provider chooses. Returns come from two places: income paid out by the investments (dividends from shares, interest from bonds) and changes in their price.

GOV.UK lists these as qualifying investments:

Cryptoasset exchange traded notes cannot be held in a stocks and shares ISA unless they were already held there before 06/04/2026. They now belong in an innovative finance ISA.

You cannot move shares you already own into an ISA, except shares from certain employee share schemes (Save As You Earn and Share Incentive Plans), which must be transferred within 90 days. Shares held outside an ISA can be sold and the cash paid in and used to buy them back inside the ISA (sometimes called “Bed and ISA”); HMRC treats the sale as a disposal for Capital Gains Tax.

Inside a stocks and shares ISA there is no UK tax on dividends, interest or capital gains, and nothing to report on a tax return.

Outside an ISA in 2026/27, dividends above the £500 dividend allowance are taxed at 10.75%, 35.75% or 39.35% depending on your Income Tax band, and gains above the £3,000 Capital Gains Tax allowance are taxed at 18% or 24%. How much the ISA wrapper saves depends on how much income and gain the investments produce and on your tax position.

Tax treatment depends on individual circumstances and tax rules can change.

The value of investments can fall as well as rise, and you may get back less than you paid in. There is no guaranteed return.

Prices can move sharply over short periods. The less time there is before the money is needed, the less time there is for any fall to be recovered, and a fall may not be recovered at all.

Diversification means spreading money across many different investments so that a problem with any one of them has a smaller effect. A fund that holds hundreds of companies is more diversified than a single share. Diversification reduces the effect of one holding failing; it does not stop the whole market falling.

Costs are taken whether investments go up or down, and they reduce what you end up with. Common charges include:

If an authorised investment firm fails and there is a shortfall in the money or investments it holds for you, the FSCS can pay up to £85,000 per person, per firm (for firms failing after 01/04/2019). The FSCS does not compensate for poor investment performance.

The FCA Firm Checker shows whether a provider is authorised and has permission for the service it offers.

The Individual Savings Account (Amendment) (No. 2) Regulations 2026, made on 10/09/2026, change how cash is treated inside stocks and shares ISAs from 06/04/2027:

Capital at risk. Past performance is not a guide to future returns. The value of investments can fall as well as rise.

Whether investing suits a particular situation depends on individual circumstances. MoneyHelper offers free, impartial guidance, and a regulated financial adviser can give personal advice.