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. Every adult can invest up to £20,000 into an ISA in the 2022/23 tax year. This allowance can be split between a Cash ISA, which is for cash savings, and a Stocks and Shares ISA, which allows individuals to invest in equities and bonds.
Investing in an ISA 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, ISAs can be transferred to a spouse free of inheritance tax when you die. A surviving spouse does not have to cash in ISA assets, which 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. Investors can buy individual shares or they can choose to invest in funds or investment trusts. While shares and pooled funds, such as OEICs, can be a popular choice to invest in global markets, investors should also consider the benefits of investing in a Stocks and Shares ISA via investment trusts.
The closed-ended structure of an investment trusts makes them ideally suited for longer-term investment strategies, as investment trust managers don’t have to sell their investments or keep large amounts of cash for when investors want their money back. Investment trusts can also borrow money to invest – known as gearing – which can enhance long-term performance (although gearing can also increase short-term volatility).
A Stocks and Shares ISA 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 for the long term, ideally for more than five years.
However, investing in a Stocks and Shares ISA using investment trusts can help investors access some of the most exciting investment opportunities in the UK and around the world. Many investment trusts help investors to share in the long-term growth potential of the UK stock market, for example, while others can invest internationally, including across global emerging markets or the Asia-Pacific regions. And each trust benefits from the guidance and insights of professional fund managers.
J.P. Morgan Asset Management has more than 20 investment trusts, including growth and income options. Each of our investment trusts can be accessed through a Stocks and Shares ISA, allowing savers to benefit from the backing and resources of one the UK's largest investment trust managers.