Why You SHOULDN'T Use A Stocks & Shares ISA



*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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22 thoughts on “Why You SHOULDN'T Use A Stocks & Shares ISA”

  1. 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.

  2. 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.

  3. 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..

  4. 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.

  5. 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 ?

  6. 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.

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