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What is a ‘Stocks and Shares Self Select ISA’ and why do you need to know about it?

To fully understand a ‘Stocks and Shares Self Select ISA’, we should first talk about a ‘Stocks and Shares ISA’. This is a tax-efficient investment account that allows you to put your money into a range of investments. So instead of putting your money into a cash ISA and earning minimal interest, you could put your money into a wide variety of investments including individual shares, investment funds and investment trusts. You could also place them in Government or Corporate bonds. 

Each financial year (from 6th April 2021 – 5 April 2022), you have an allowance of £20,000 in the account which is free of Capital Gains Tax. Of course, there is an element of risk with this type of ISA as your investments can go up and down. In saying that, the volatility is not a reason to be concerned but should be a positive, as it is giving investors incredible opportunities. 

Some banks do offer a ‘Stocks and Shares ISA’ where they invest your money for you. Unfortunately, using this strategy, account holders are lucky to see 3% a year. We want to be seeing much, much more of a return on our investments, even going as far to say 3% a month! 

With a ‘Stocks and Shares Self-Select ISA’ you are in charge of what investments you go into and the strategy you want to use. These ISAs are ‘execution-only meaning you are in charge of the investments you go into and how they are managed. 

Make sure you do your own research and find the right strategy for you and your investments.  It is imperative to always have a strategy with rules if you want to see profitable results. With the right strategies, by investing even a hundred pounds in an investment with upside potential you could see game-changing results. 

Self-Select ISAs allow you to plan your portfolio and strategies better by consolidating your past ISAs in one place. Another plus of a Self-Select ISA is you are not restricted to UK investments. If the settlement is possible in the London Stock Exchange’s electronic settlement system ‘Crest’ then many providers will be able to facilitate this. If you want to enter foreign investments, ensure this is possible before taking out your ISA.  

It is, of course, important to check all details on the provider’s website to see what services are available and the charges applicable to you before deciding. Charges that could be incurred are: 

  • Annual Fees – you will find that most providers will take a percentage charge subject to a minimum and maximum fee. The larger your portfolio with several ISAs can mean you are eligible for the cheapest deal with flat fees.
  • Dealing Charges – Depending on whether the deal is conducted over the phone or internet dictates the ‘dealing charge’. Deals over the internet are normally the cheapest and you will be charged a flat fee. It is worth checking if the provider has any special deals for frequent traders to minimize these costs. The costs can range from £2.50 – £35.
  • Exit Costs – Make sure to check how much it would cost to transfer your investments to another provider. In the majority of cases, you are charged between £10-£15 per plus an extra fee per holding for closing the account which can be capped. 

It is important to be aware of the types of ISAs available to you, especially a Self-Select ISA, as it gives you the freedom to choose how you manage your investments. This in turn allows you to be in charge of your profits and increase your return on investment over the 3% a year you would get if it was being handled by a bank. 

As always, the most important thing before entering anything financially is RESEARCH. Look at all available providers to ensure they are offering you the right services, the more research you do, the less this will cost you down the line with charges. 

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