It's very important you understand what the tax breaks are and whether they really matter to you before you decide to use your ISA allowance for investing. CGT is a tax you'll have to pay on the gain you make when selling things such as shares, a second home you usually don't pay capital gains on selling your main home and jewellery.
You might then have to pay tax on that. But it's important to understand that If you have other capital gains, such as you had a buy-to-let property and you've sold it, then if it made a profit, you could have used up your CGT allowance that tax year. See our Tax rates guide for info on the CGT rates you'll then pay. There are two ways you make money from investing. One is when the shares increase in value and then you reap a nice little profit when you sell them.
The other is when they pay dividends. Dividends are a bit like interest on a savings account. With corporate bonds, instead of investing in a company's success, you're effectively lending money to it for a set time. In return, it'll have to pay you interest. You're taking the risk that it won't give you the money back, so it isn't risk-free. But the good news is If you've got corporate bonds or bond funds within an ISA that pays out interest, you don't have to pay any tax on it. Bear in mind that this allowance covers your normal savings interest in a bank as well as other forms of interest.
As with the dividend allowance, you'll owe tax on any interest earned above its limit.
Whether you should invest depends on your personal circumstances and the amount of risk you're willing to take. But as a rule of thumb, you should invest for at least five years. This allows enough time to ride out any bumps in the market that might see you make a loss on your money. As such, if you're looking to use your money within the next few years, you should probably stick to cash savings. It's very important to understand that there's no such thing as the best stocks and shares investment.
go here Over the long run, historically, stocks and shares have outperformed money in cash savings accounts. But that's no guarantee they'll do so in the future.
Remember, investments can go down as well as up. Don't put all your eggs in one basket.
Platform charges for stocks & shares ISAs can vary from very cheap to very expensive, this guide tells you where to get the best and cheapest. 8 results Stocks and shares ISAs could help you grow your money faster than many other accounts, and make the most of your Compare investment ISA accounts to see those with the lowest charges. About our investment ISAs comparison.
Try to diversify as much as you can to lower your risk exposure. If you're saving over the short-term, it's wise not to take too much of a risk. It's recommended you invest for at least five years. If you can't, cash is often best. Review your portfolio. A fund might be a dud, a fund manager might leave, or you might not be willing to take as many risks as you once did. Don't panic.
Investments can go down as well as up. Don't be tempted to sell or buy funds just because everyone else is. In a nutshell:. First you need to pick which provider to buy your ISA from, then you need to decide what investments to put in it. It's like buying bread in a supermarket. You first need to pick where you want to buy the bread from decide which platform to use , then choose what bread you want to buy from there your funds. To stretch the analogy somewhat, imagine each supermarket charges a different price for its shopping bags. Some supermarket bags are cheaper than others, but the ones that have the most expensive bags may be the ones that sell the bread the cheapest.
So it's a combination of the two factors that needs to be taken into consideration. Note that while the platform fee is charged by the platform you choose, the company running the funds will be charging you for the funds. This may be useful for people coming up to retirement or anyone else who no longer wants to take a risk with their money. Once you've requested it, the transfer may take a few weeks. If you're switching with the same provider, there usually won't be a fee.
It's tempting to try to time the market, but it's almost impossible and even the most experienced investors get it wrong. By pulling out of the market as soon as a share dips or trying to second-guess when a share will reach its peak, you could lose out on sharp recoveries or see the price go down again. This will give you an added benefit of something called 'pound cost averaging'. Smaller investing on a regular basis means any drop in share price won't be too noticeable. Any savings or investments which stay within the tax-free ISA wrapper will continue to earn interest and reap the tax benefits until you withdraw the money.
Both the platform and the funds you invest in will cost you money. The main ones to look out for are:. It's as if you have to buy a carrier bag from the supermarket: some charge you 50p for it and others charge you 10p. This can either be a flat fee best for high investors or a percentage of the value of your funds the larger your investments, the more it'll cost you. A platform might have been cheap at first, but new charging structures mean it may no longer be. Be sure to check any exit fees with your current provider, but if you won't take too much of a hit by leaving, then in the long run it'll likely be cheaper to switch provider to one with lower fees.
This option really is best suited for those who know what they're doing.
You need to be clear on why you're investing, what you want to achieve and, importantly, how long it will take to achieve it. You'll have to research your chosen investments, build your own portfolio and then keep track of it. If so, make sure you take into consideration any exit fees from your existing platform before you transfer. If you do want to switch to one of the platforms below, you'll have to do an ISA transfer.
Be aware however that the new platform may not offer all the investment options your previous platform did. So if there is a particular fund you like investing in, you'll have to weigh up whether it's better to stay with your existing platform that still offers it, or move to a new platform to take advantage of lower charges. For the best buys below, we list the different costs.
When looking at do-it-yourself platforms, we've done our comparisons to show which are best for frequent or infrequent traders. We know from experience at MSE that cheap isn't always what people are looking for when it comes to parting with their money, so we have also included a platform in this section which costs a bit more, but is a more comprehensive offering with an easier to use website.
How much a platform will cost you will depend on how much money you have invested and how often you trade, so you may need to do some sums yourself as well. For the sake of our best buys in this section, we looked at the different platforms' charges and trading costs.
Cavendish Online. So if you don't mind the no-frills approach which Cavendish offers, and want access to the funds Fidelity has, you'd be better off transferring to Cavendish to save on the platform fee. Annual platform charge: 0. No frills investment website iWeb , which is operated by Halifax Share Dealing, is one of the cheapest do-it-yourself platforms out there. It's not the most flashy website and doesn't offer a mobile app, so if this is something you're interested in, you could look at Interactive Investor below.
As it has a fixed fee, if you have a large pot of money to transfer, it can work out a lot cheaper than a percentage-based charging model. See the II site for other plan options. It offers a mobile app and a wide range of funds to choose from, so if you want a diverse portfolio, and want to trade and check on your funds on the go, this is a good pick.
So if you're not sure of how much risk to take, you may be better off looking at the do-it-for-me platforms to help guide you. A lot of the platforms in this section could also fall under the do-it-yourself category above, but they also offer you a helping hand if needed. With do-it-with-me platforms, we assumed you won't be trading but will stick with your original portfolio of investments.
We looked at platforms which offer either a list of suggested funds, or a range of portfolios, and our top picks come with the lowest charges of the platforms we looked at. For the sake of our best buys in this section, we looked at the different platforms charges and charges for their suggested portfolios. Cavendish Online has low platform fees and also doesn't charge you for buying and selling funds.