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Is a stocks and shares ISA right for me?

A stocks and shares ISA – or Individual Savings Account – is a tax-efficient way to help build long-term savings and boost your future wealth.

J.P. Morgan Investment Trust Team

18 Feb 2019

Every adult can invest up to £20,000 into an ISA in the 2019/20 tax year. This can be split between a cash ISA, and a stocks and shares ISA, the latter of which allows individuals to invest in equities and bonds.

Tax-efficient savings

Investing in a stocks and shares ISA (or any other type) allows you to keep more of your gains, since less is handed over to the taxman. ISAs offer three main tax savings for investors:

  • Capital gains tax exemption
    There is no capital gains tax (CGT) to pay on any investment gains from ISAs. If you are saving over a longer period of time and using the allowance each year, this can be a significant advantage.

  • Income tax savings
    Higher and additional-rate tax payers do not have to pay any additional tax on share dividends received within an ISA. In addition, the income received on bonds is paid tax-free; this applies to basic-rate taxpayers as well.

  • Tax-free withdrawals
    There are also tax savings when you come to cash in your ISA. If you take a regular income from these savings plans you don’t have to declare this on your tax return and there is no further income tax to pay. This isn’t the case with income taken from a pension.

Finally, these plans can be transferred to a spouse free of inheritance tax when you die. A surviving spouse does not have to cash in these assets, but they can be added to their ISA allowance for that year.

Exciting investment opportunities

A stocks and shares ISA allows investment in equity markets, bond markets and even a range of multi-asset funds, which will include cash and property holdings.

A stocks and shares ISA allows investment in equity markets, bond markets and even a range of multi-asset funds, which will include cash and property holdings.

Investing in assets – such as shares and bonds – is one of the best ways to try to inflation-proof your savings over the long term.

Investors can buy individual shares or invest in funds or investment trusts. These pooled funds can help investors diversify their holdings, particularly in global markets, in a cost-effective way, especially for those with relatively small sums to invest.

Annabel Brodie-Smith, communications director of the Association of Investment Companies, says: “Investment trusts are a way of investing in a single company which gives you a share of a much larger portfolio.

“Many investment companies invest in more than one country, like those in the global emerging markets or Asia-Pacific sectors, for example. This means investors can access the most exciting opportunities around the world with the benefit of a professional fund manager to manage their portfolio.”

The closed-end structure of an investment trust makes it ideal for longer-term investment strategies. This means investment company managers don’t have to sell their investments or keep large amounts of cash for when investors want their money back. Investment companies can also borrow money to invest – known as gearing – which can enhance performance.

Such assets can be more volatile than cash, particularly over the shorter term. For this reason you should only consider a stocks and shares ISA if you can keep your money invested long term, ideally for more than five years.

J.P. Morgan Asset Management has more than 20 investment trusts, including growth and income options, which can be invested in through a stocks and share ISA. They allow investors to benefit from the backing and resources of one the UK's largest investment trust managers.

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Make the most of your 2020/21 ISA allowance

Discover how you can shape up your savings plan and invest in our range of investment trusts to maximise your stocks and shares ISA potential.

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This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own professional advisers, if any investment mentioned herein is believed to be suitable to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not a reliable indicator of current and future results.
 

J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy.
 

This communication is issued in the UK by JPMorgan Asset Management (UK) Limited, which is authorised and regulated by the Financial Conduct Authority. Registered in England No. 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.

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