What is Stocks and Shares ISA?

Full Definition

A Stocks and Shares ISA is a tax-advantaged investment wrapper that can hold a wide range of investments, including individual company shares, investment funds, exchange-traded funds, investment trusts, and certain bonds. Any capital growth on investments held within the ISA is entirely free of Capital Gains Tax (which would otherwise apply above the £3,000 annual exempt amount for 2026/27), and any dividend income or interest earned within it is entirely free of Income Tax (which would otherwise be taxed above the £500 dividend allowance, or the relevant Personal Savings Allowance for bond interest), with no need to declare any of it on a Self Assessment return. Stocks and Shares ISAs share the overall £20,000 annual ISA allowance for 2026/27 with any Cash ISA, Lifetime ISA or Innovative Finance ISA held in the same tax year, and money can generally be moved between ISA providers or ISA types through a formal ISA transfer without it counting as a new subscription or losing its tax-free status. Because investment values can fall as well as rise, a Stocks and Shares ISA carries capital risk that a Cash ISA does not, and is generally recommended for money that will not be needed for at least five years, giving time to ride out short-term market volatility; over most long time horizons, historical returns from diversified equity investing have tended to outpace cash savings rates, though this is not guaranteed for any individual period.

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