*IMPORTANT UPDATE*
The UK Government has slashed the 0% Capital Gains amount from £12,300 to £6,000 in 2023/2024 tax year and down to £3,000 the following year. This significantly affects the points discussed in this video, but for very low amounts invested initially, where even £3,000 is an exceptionally high gain relative to money put in, the video still explains a useful point.
In this video I will explain why you shouldn’t use a Stocks & Shares ISA.
Stocks and Shares ISAs are a very popular way to invest in the UK because they mean you don’t have to pay capital gains and dividend tax.
And most people automatically assume that they HAVE to use a Stocks and Shares ISA to invest – otherwise the taxman will decimate your portfolio.
But the UK also has very favourable 0% tax bands on capital gains and dividend tax which mean a Stocks & Shares ISA is not really going to be relevant for many people.
And if you are investing smaller amounts, a General Investing account can be a better option.
This is because Stocks & Shares ISAs are generally more expensive – whatever it is that you invest into – ETFs, US stocks, UK stocks, dividend stocks or anything else, there is usually a cheaper way to do it outside an ISA than through a Stocks and Shares ISA account.
And especially if you are starting out, a free or cheap General Investing account can be a great way to try things out and learn the ropes without having to pay more.
And you can always switch to using a Stocks and Shares account later if your investments grow – your annual ISA allowance is £20,000 which is plenty for most people.
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A Stocks & Shares ISA can seem like a great option for anyone looking to invest in the stock market. It offers tax-free growth and income, as well as the potential for capital growth over the long term. However, there are some reasons why you shouldn’t use a Stocks & Shares ISA.
First and foremost, investing in the stock market carries inherent risks. While the potential for high returns is certainly attractive, there is also the potential for significant losses. If you are not comfortable with the idea of potentially losing a portion of your investment, then a Stocks & Shares ISA may not be the best option for you.
Additionally, the stock market can be volatile and unpredictable. While it may seem like a good idea to invest in individual stocks and shares, the reality is that it can be difficult to consistently pick winning investments. A diversified portfolio is often a better way to manage risk and improve your chances of long-term success. If you don’t have the time or expertise to research and manage a diversified portfolio of stocks and shares, then a Stocks & Shares ISA may not be the best option for you.
Another reason why you shouldn’t use a Stocks & Shares ISA is if you have high-interest debt. If you have high-interest debt, such as credit card debt, it may be a better use of your money to pay off that debt before investing in the stock market. The interest you are paying on that debt is likely higher than any potential returns you may earn from investing in a Stocks & Shares ISA.
Finally, if you anticipate needing to access your money in the short term, then a Stocks & Shares ISA may not be the best option for you. While it is possible to access your money in a Stocks & Shares ISA, it may not be as liquid as other types of investments, such as a savings account or a Cash ISA.
In conclusion, while a Stocks & Shares ISA can offer tax-free growth and income, as well as the potential for capital growth, there are some reasons why you shouldn’t use one. If you are not comfortable with the risks associated with investing in the stock market, if you don’t have the time or expertise to manage a diversified portfolio, if you have high-interest debt, or if you anticipate needing to access your money in the short term, then a Stocks & Shares ISA may not be the best option for you. It’s important to carefully consider your financial situation and investment goals before deciding whether a Stocks & Shares ISA is right for you.
IMPORTANT UPDATE
The UK Government has slashed the 0% Capital Gains amount from £12,300 to £6,000 in 2023/2024 tax year and down to £3,000 the following year. This significantly affects the points discussed in this video, but for very low amounts invested initially, where even £3,000 is an exceptionally high gain relative to money put in, the video still explains a useful point.
I have been paying monthly into a stocks and shares ISA but now my income has dropped (by choice). Not sure whether to keep paying it from savings, pay less or stop altogether! I suppose it depends on when I need it, possibly in four years time.
stocks and share isas have historically been generally a good idea. But be awake that they provide no death duty shelter. If your estate is over the death duty allowance then money in isa account may have 40% death duty tax..
Stupid title to an interesting video.
I'm investing the full £20k/year into my ISA. I'm paying about £90/year, but have recently been consistently getting around £4-5k year in returns (from my stocks), and I'm an earner on the higher-side (I have 2 jobs, so 6-figures salary). When I take it all out to buy a property, I'm going to be saving a hell of a lot in tax.
and ISA and SIPP are key vehicles to invest really tax free.
Dividend tax allowance has reduced to £1000 in the 2023/24 tax year and will further reduce to only £500 in the 2024/25 tax year.
I’ve got a stocks and shares isa it’s with prudential rubbish. Made £500 off 20 grand in two years went up to 21500 and dropped to 20500.
I can now get a fixed rate at 5.5% in Lloyds bank where that would make £800 a year at that rate or fixed for 2 years would be £1600 ?
If you are based in the UK. And you use a ISA to buy US stock do you owe any tax ?
very useful video! I dont have to pay tax! yeah!
what is th best ibkr plan you think.. is there any hidden fees.
NOW ONLY £1,000 DIVIDEND TAX ALLOWANCE FOR U.K. in 2023
If you trade outside of an ISA you need to record all your trades for tax purposes, if your platform doesn't work everything out for you then its going to be a long expensive hassle working it out, if you run multiple accounts that trade the same stocks you will have to manually work out all the details of your trades and pool them together.
If you "trade" then it makes little sense to do this when you can just use a Stocks and Shares ISA and not have to be concerned with this hassle, especially if you aren't even using your allowence.
I have Sipp with vanguard, do you recommand opening gia/isa on a different platform to diversify the Holdings?
most confusing video I have watched so far
Make a video with updated capital gains allowance its going to 6k then 3k then who knows
Why are you using $ instead of GBP in your graphic? Bad channel is bad.
May want to take this down now that allowances are being reduced by 75%