Every adult in the UK has a £20,000 ISA allowance for the 2024/25 tax year, which started on 6 April 2024 and ends on 5 April 2025. If you don't use your allowance by 5 April, you lose it. Here's what you need to know before investing in a stocks & shares ISA.
What is a Stocks & Shares ISA?
A stocks & shares ISA allows you to invest your annual ISA allowance in the stock market without paying tax on dividends, capital gains, or income from your investments. You can invest in:
- Funds: Pooled investments in shares or bonds from various companies.
- Bonds: Loans to companies or governments.
- Individual Shares: Direct investments in specific companies.
This is different from a cash ISA, which is a tax-free savings account.
ISA Allowance and Rules
For the 2024/25 tax year, the annual ISA allowance is £20,000.
You can split this allowance across different types of ISAs, but the total must not exceed £20,000.
For example, if you contribute:
- £10,000 to a cash ISA
- £4,000 to a Lifetime ISA
You can then only put £6,000 into a stocks & shares ISA for that tax year.
On 6 April 2025, your allowance resets, and you can choose how to allocate your £20,000 for the 2025/26 tax year. If you decide to use the entire allowance for a stocks & shares ISA, you cannot contribute to any other type of ISA in that tax year.
Key Points
- Tax Benefits: No tax on dividends, capital gains, or income from investments in a stocks & shares ISA.
- Investment Options: Funds, bonds, and individual shares.
- Allowance: £20,000 annually, across all ISA types.
- Deadline: Use your allowance by 5 April each tax year, or you lose it.
For more details and to manage your investments, consider consulting a financial advisor like us, or visiting www.gov.uk/individual-savings-accounts.