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.
💵 GREAT INVESTING APPS I USE
GET A FREE SHARE WORTH UP TO $150 WITH STAKE (Good for US stocks)
https://hellostake.pxf.io/qnA3xq
You will get a free share if you sign up using this link and deposit a minimum of £50.
GET A FREE SHARE WORTH UP TO £200 WITH FREETRADE (ISA and General Investing Account)
https://magic.freetrade.io/join/sasha-yanshin
You need to sign up and make any deposit to get the free share.
SIGN UP FOR ETORO (Also good for US stocks and crypto - similar price to Stake)
https://med.etoro.com/B15358_A95689_TClick_SSasha.aspx
67% of retail investor accounts lose money when trading CFDs with this provider. Your capital is at risk. Other fees may apply.
👍 SUBSCRIBE TO MY CHANNEL
https://www.youtube.com/c/SashaYanshin?sub_confirmation=1
DISCLAIMER: Some of these links may be affiliate links. If you purchase a product or service using one of these links, I will receive a small commission from the seller. There will be no additional charge for you.
DISCLAIMER: I am not a financial advisor and this is not a financial advice channel. All information is provided strictly for educational purposes. It does not take into account anybody's specific circumstances or situation. If you are making investment or other financial management decisions and require advice, please consult a suitably qualified licensed professional.
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.
💵 GREAT INVESTING APPS I USE
GET A FREE SHARE WORTH UP TO $150 WITH STAKE (Good for US stocks)
https://hellostake.pxf.io/qnA3xq
You will get a free share if you sign up using this link and deposit a minimum of £50.
GET A FREE SHARE WORTH UP TO £200 WITH FREETRADE (ISA and General Investing Account)
https://magic.freetrade.io/join/sasha-yanshin
You need to sign up and make any deposit to get the free share.
SIGN UP FOR ETORO (Also good for US stocks and crypto - similar price to Stake)
https://med.etoro.com/B15358_A95689_TClick_SSasha.aspx
67% of retail investor accounts lose money when trading CFDs with this provider. Your capital is at risk. Other fees may apply.
👍 SUBSCRIBE TO MY CHANNEL
https://www.youtube.com/c/SashaYanshin?sub_confirmation=1
DISCLAIMER: Some of these links may be affiliate links. If you purchase a product or service using one of these links, I will receive a small commission from the seller. There will be no additional charge for you.
DISCLAIMER: I am not a financial advisor and this is not a financial advice channel. All information is provided strictly for educational purposes. It does not take into account anybody's specific circumstances or situation. If you are making investment or other financial management decisions and require advice, please consult a suitably qualified licensed professional.
Hey guys, it's sasha and in this video we're going to talk about stocks and shares isa accounts, specifically we're going to talk about why you don't need a stocks and shares isa account in the uk and just before the keyboard warriors get to work and smash their Thumbs down and leave a nice comment: do me a favor and just watch this video, because this video is one of a number on my channel that is intentionally provoking thought. I am presenting a point of view that i think is incredibly useful from an angle that you might not have heard before a view that often goes against the popular narrative, but might just spark a little interesting thought. But here is a fun fact. I have a stocks and shares isa and i use it and most of my investments are in the stocks and shares isa.
I also advocate stocks and shares isis and non-stop all the time on my channel, but it is also incredibly important to recognize that a stocks and shares isa account is not always the best choice. So let's do it. Let's talk about why you might not want to use the stocks and shares isa and - and i'm gon na, give you some really interesting food for thought. Now.
A stocks and shares isa is an investing account that is available in the uk that lets you invest without paying any taxes. Specifically, all the investments made within a stocks and shares isa account are free from dividend. Tax and capital gains tax. Any investment you hold in a regular investing account that isn't an isa is subject to those taxes, so that is a massive plus and you're also allowed to deposit up to 20 000 pounds per year into your stocks and shares isa, which is more than 99 of People out there will ever be able to invest per year so for most normal, regular people.
The stocks and shares isa is basically pretty much limitless. But here is the issue and stocks and shares isa takes more effort to set up and manage by the investing platform by the company. It adds cost. It adds a whole load of things that you don't really care, but they do and, as a result, there are far less stocks and shares.
Iso accounts out there than regular investing platforms because of this and the ones that do exist all charge some sort of fees. They charge more than the free equivalents, the best overall option for a stocks and shares iso account out there. At the moment, in my opinion, is free trade and the free trade isa costs three pounds per month and then also charges you a 0.45 for an exchange fee. Every time you make a trade in any foreign shares, so, for example, if you're like me and you like to invest in u.s stocks, that is a 0.45 percent every single time you make a transaction when you go and buy the stock, you pay it.
When you go and sell it, you pay it. When you go and buy some other stock using that money, you pay it again. Then there's vanguard they only let you invest in the etf, so there's no stock options at all and they charge you 0.15 per year. As an annual management fee now that is really really cheap. If you just want to dump your money into vusa, for example, the s p 500 etf, that will be cheaper for you for lower amounts than the free trade, and it's just really good value. But it is still more than zero. You still have to pay that fee and people get very scared of these taxes. There's this perception that if you don't have an isa, if you don't use a stocks and shares isa account, your investing portfolio is going to be pillaged by the tax man and you will be left with a tiny fraction.
But let's look at the numbers: the zero percent dividend. Income allowance in the uk is 2 000 pounds. That means you can earn 2 000 pounds worth of dividends before you owe any tax on them whatsoever, and if you don't own your own company and pay yourself dividends through that or if you don't have some other random dividend income. Two thousand pounds is a lot.
For example, if you have a dividend portfolio that pays you three percent per year on average across all of those stocks, you will pay no dividend tax, even with a 66 000 pound invested into those dividend stocks. So that is quite quite something to think about. For most people, this will not be an issue. This dividend, tax and dividends are not the sort of thing that might just jump out of nowhere and suddenly you're going to have to go and pay their tax.
Your dividend, stocks are not going to suddenly start paying you 50 per year, dividend yields, and then we have capital gains, which is the other tax that stocks and shares isa allows you to avoid. In the uk we have a zero percent tax band for capital gains and that is set at 12 300 pounds per year. So, regardless of how much you earn an income elsewhere and whatever you do elsewhere, you can get 12 300 pounds per year in capital, gains completely tax free and remember that this is just on the gains. That's how much your investments have to grow by and even then the tax is only due if and when he happened to sell that.
So let's say you invest your money and you get a great year. For example, you get a 20 return on your investment. That is a really good year. That's twice what the market returns on average.
So if you invested 61.5 000 pounds or less and then sold it for 73 800 pounds so that 12 300 on top, you will not owe any tax and that remember is per year and i'm guessing that most people are not going to have the sort of Portfolios where this is gon na begin applying most people are not investing tens of thousands of pounds and getting double digit high double digit returns on that investment. But here is the cool thing. Let's say you want to invest in vusa that s p 500 etf and let's say you want to do it completely for free. You can do it completely for free by just setting up a free trade general investing account, instead of doing it inside the isa 100.
Free zero fees no cost at all, and if you use my link in the description for free trade, you can open a free trade account and get a free share for using the link. So you will actually get paid to invest instead of having to pay to do it or if you want to invest in u.s stocks with a few hundred pounds. For example, stay can be a much much cheaper platform than free trade. Stake. Has a 0.5 foreign exchange fee compared to free trades, not 0.45, so it is a tiny bit higher, but you only pay it once when you deposit money into the platform and then again only when you withdraw the free trade isa will charge you that 0.45, every Single time you make a trade, so you buy a stock, you pay, you sell it, you pay it! Then you buy a different one. You pay it again. So on steak, you can put money in pay that one-off fx fee and then buy and sell companies for as long as you want. Whenever you want, however many times you want as long as you don't do day trading and yeah, you guessed it, you can also get a free share with stake.
If you use my link in the description below to set up and fund the account as well, i've got all the free shares and because these are general investing accounts, you can literally set up as many as you want. With the i said, there's a restriction. You can only use one per financial year with these. You can have as many as you want and you can collect all of those free shares if you want to.
If that's the choice that you want to make, but hey here is an important counter argument that i'm sure some people will put forward because let's say you start doing this, you start investing outside the stocks and shares isa and then continue investing for a while and Build up a big pot over time, because maybe small amounts over time. They will grow year after year and you'll keep putting money in then, when you come to sell at some point in the future, maybe in like 10 years, because you want to use that money to buy a house or something like that, then you will own capital Gains tax because there's gon na be one big sell far in the future, when you might have a lot of capital gains tax, and that is a very valid argument. That is why i have a stocks and shares isa, and that is why a lot of people should consider having a stocks and shares isa. But if you're, just starting out and investing you just want to understand how it works, try it out.
For the first time, there is nothing stopping you, starting out with a general investing account that is free or very cheap, and then, if your investments are growing so fast that you know, capital gains tax becomes something that could be an issue. You can always open a stocks and shares isa at that point. If you want to, you can even move the money over from your general investing account to that isa at that point, if you choose to and if you're happy with the fees and yes, you will be out of the market for a few days, while you're waiting For the money to be sold in one deposited into your current account and then invest it into the other one. But in the grand scheme of things that might still save you quite a lot of money and remember that the 12 300 pound allowance is per financial year, you can sell your investment in chunks as long as it's the amount that you sold doesn't qualify for capital Against tax, that's all that matters. You can sell one bit before the end of the financial year at the end of the financial year just the beginning of april, and then you can sell another bit like one or two days later and in the other financial year. And then your tax-free allowance is essentially double because you're using two different announcements from two different years: almost 25 000 pounds in capital gains completely tax-free. If you do that, if you have a spouse, for example - and you invest your money jointly, you make your decisions together. You could, if you choose to get two separate, uh investing accounts and they both will have a zero percent capital gains.
So you're, then doubling your allowance again now the truth is there isn't a huge difference in price. It is not hugely expensive to have this icer and for the peace of mind, you might just find that it is easier to start with the stocks and shares iso account, and then you don't have to think about it. You don't have to worry. You don't have to work out.
What is your capital gains this year? Will you have to pay tax? You won't have to worry about those tax brackets changing or anything like that, and at the end of the day, that free trade stocks and shares isa is at the moment only costing you 36 pounds per year, plus that 0.45 fee when you buy and sell a Stock, so if that stock grows a little bit you're roughly talking about one percent to buy in and then sell back out of that stock, but that one percent is still one percent, but there are new investing apps entering the uk market in the coming months. I already know this: somehow i'm suspecting the samara as well and they will offer more free or very cheap investing options, but will probably not have an isa account, and it's just one of those things that you should think about, because it could be a few hundred Pound difference, maybe even more than that, depending on your investing style and time. We all have different circumstances. We all have different investing styles, different approaches, and one thing can work for one person and be the absolute right choice, but it cannot be the right option for somebody else.
If you found this video useful, please don't forget to smash the like button for the youtube algorithm. Thank you so much for watching. I really really appreciate it and, as always i'll see you guys later, you.
The title of the video should be changed I understand your point of view but this title sends the totally wrong message to others that won’t watch the full video etc
If you were lucky enough to have bought Greatland Gold shares in 2015 for 1/10th of a pence, and bought 5 million shares for £5,000 and stuck them in your S&S ISA, five years later that £5000 would have turned into around £1.75 million. It doesn't happen very often, but it is rare examples like this when you definitely want a stocks and shares ISA.
I use ISAs not only to protect my stocks from CGT and Divi Tax, but mostly to save me the hassle of filing a tax return every year! Then use the £12.3k allowance for Bitcoin. Defo use the spouse allowance too!
I wish people wouldn't call ISAs "tax free" you pay 0.5% stamp duty tax on every purchase, which I believe is unfair, because you never take legal title of ownership! Can you stop/profit from short lending? No!
makes sense when you are starting out on the investment side.
And it is definitely worth, over time, to also get an S&S ISA I think.
Do you think that an S&S LISA is still worth it up to the £4k pa limit before looking at your other options?
EDIT: Just for clarification, I am referring to retirement. Not planning on touching the money (that I am talking about here) till then
CGT allowances could reduce or go altogether. CGT on gains > £12,300 are at historical lows – to pay for this pandemic tax will need to be paid, therefore we could see both allowance and rates changing. ISA S&S mitigate against these future changes. Finally, you never know – the ISA sub 20k allowance may change also… Atleast at this point, your money is in a wrapper
Thanks for this. I’m very late to the game and this is SO relevant to where I am now. Difficult to find info on YouTube that is free from BS and unbiased – great channel. 👍
Question. If you hold equities for a long long time, should you or can you sell and realise 12,300 and then rebuy it right back. do this right at the end of the tax year. Therefore over 10 years you would have made use of that allowance and have 123k free of capital gains? all you pay is the transaction fees. I have etorro account and im very much thinking about this…
I did have a question regarding this. For small investors like myself, would this video still apply for me?
If I plan to invest £300 a month into £VUSA and decide to take it out in 20-30 years, with the amount sitting at let's saying 100k, would I therefore not have to pay any tax as I've used 12k of my capitals gains tax allowance each year? If not, then surely an ISA is worth it if I'm going to be taxed on the 100k. Sorry just clarifying
Most people will not want to do their own tax return and when you realise gains in an investment account you have to declare those gains on a tax return even if it is below the £12,300. You typically pay somewhere between £200 – £400 for an accountant to do your tax return which in my opinion negates the small fees you pay to have a S&S ISA account.
This is such a fresh perspective! I’m new to investing as we’re saving for non-military life and your channel has been so helpful. I opened a vanguard isa a few months ago but I might to this as well – I’ll use your links if I do 😊 I’m actually a blogger and randomly stumbled upon your keywords video the other day, such a good breakdown of things I hadn’t considered, thank you!
Found a ETF that I could only invest in the U.K. through a broker that didn’t do ISAs so did some similar calculations to you, and worked out I didn’t actually need one!
One thing, an ISA is covered by FSCS £85k compensation scheme, not sure about a UK GIA (FSCS scheme is per company not per account, so not sure if you had both in say freetrade) and certainly Stake, a US trader would not be covered. Again I guess a Vanguard ISA would be covered. This is if the trader goes belly up (with any cash account) not the shares. Just a thought with so many companies entering the trading business!
Great video. I was lucky this year in that I filled up my Stocks & Shares ISA and I was reluctant to make any further investments in a GIA purely because I worry about the tax man. My takeaway from this is that I can put my spare cash into a GIA and when the new tax year starts, I can move the monies across into a new ISA.
I'll have to have a search around and confirm that logic, but if so then that's great!
Hold on, the 12k a year in capital gains is already included in a regular salary isn't it?
Meaning if I have my job at 50k a year my first 12k will already be benefiting of this
Thanks for your sharing. Does it mean if we invest shares via ISA account is tax free without the threshold of 12300 Capital gain allowance & 2000 dividend allowance per year? Or we suppose to aggregate the ISA account gain/income together with any free trade general investing account to claim those tax allowance for every fiscal year?
I agree 100% and went through this decisions myself earlier this year on Freetrade. The problem you'll have to sell and re-buy all your stocks if you which over to the ISA later. You can't just switch over easily. Which is a huge inconvenience and can get messy if you have tons of open trades. In the long-term, I believe the ISA is better IMO… remember we're talking about £36/yr (Freetrade), that's a drop in comparison to the gains you could have in 1yr.
Excellent video clear to the point, gives me a better understanding, in this snake pit world of investements. many thanks again
Haven't been convinced. For 99% of people wanting to invest, just open up a S&S ISA with someone like Vanguard. Set a regular payment and if you see a decent market drop do what you can to put extra money in. You will be charged almost nothing to do so. Free-trade £36 a year with fees EVERY time you buy something no thanks. If you are the sort of person that can put in £20k+ a year into a ISA, or £50k with your partner, then you need to be seeking professional help to maximise what you will pay in tax across your accounts. For us mear mortals putting £6k a year into an ISA, we will never have to worry.
Hello Sacha
Thank you for the video!
I’m thinking of having ISA on FreeTrade. Do they still charge 0.4% even I only buy S&P 500 fund such as VUSA or VUAG? I assume it’s in GBP, but how the price is made is based on S&P market which is USD. Is there any fee from Feetrade, or is there any hidden fee of currency exchange due to the nature it is in GBP but tracking USD based?
Sasha thank you for all your hard work and valuable content you give to us.
I’m looking for a SIPP platform to invest in individual funds..are you still happy with your Freetrade platform?
Cheers 😀
I agree everything depends of your strategy for me I set up a general account for make trades and try to gain 12K year ( it is not easy ) end of ISA year transfer to my ISA and buy companies for long 5 to 10 years or companies pay a good dividends
I have FT ISA and it's great but they don't have nearly as many stocks as trading 212. On the other hand FT is much better with AIM stocks where 212 is absolute rubbish (it takes days to fill an order)
As far as non-isa accounts go, IMO the best is IB which I know you are using as well and I really appreciated the video you made about it.
Wouldn’t the problem with transferring your stocks from a normal account to an ISA mean that you buy in at the new stock price. Say you had 5k invested in a portfolio and you left it there for ten years and you say got capital gains of 95k and you then decided an isa would be better for future because of no taxation would you then have 100k worth of stocks but have less of them because the value of those stocks increased over the ten years? Or would u keep the same amount of stocks and just pay the fee for transferring to the ISA account, I’m new to this stuff so any help would be appreciated.
Really good video. Some questions that occurred to me whilst I was watching it…
1. If you have a normal job and pay PAYE tax..what happens when your lucky enough to earn over the 12.3k CGT threshold? Is it automated via the platform or is it some HMRC nightmare?
2. Kinda random, is CGT the same as inheritance tax? How does inheriting a house (which obviously will be worth more than 12k) work??
Not expecting custom financial advice or anything but would be a cool follow up video.
It makes sense to use both an ISA and GIA (if you are lucky enough to afford it) to take advantage of the tax free allowances. This has only recently dawned on me as a way to have more time in the market and then "bed and ISA" those investments or crystallise the gains in a tax efficient manner. Chris Bournes YT channel covers this very well. I think your title perhaps should have been entitled "Don't forget your GIA" (or along those lines). However you're correct in bringing this investing strategy to our attention. Your take on it is good food for thought.
Wondering why Sasha stopped talking about Trading 212, not even an affiliate link. Do I missed something about 212?
Trading 212's ISA has no platform or transaction fees, its forex fees are very low (lower than Freetrade's), and the overwhelming majority of stocks and ETF's you'd want are available.
Only real downsides are that ADR stocks are not available, such as Chinese EV stocks like Nio… And you'll probably have to join a waiting list to open an account, at present 😛
This was good, thank you Sasha but it has actually made me realise that I dont have a profit realisation strategy. Is it better to sell after a run of success, extract the profit and then re-buy in? Or is it better to just stick in for as long as possible? Is it different for different classes, so with an ETF do you just stick in but for stocks you should have a target sell price? A video on this would be REALY useful please.
HEY THICKO! YOu do know you can invest in US stocks LISTED on the London Stock Exchange and this pay ZERO FX fees!
There he goes again giving BAD ADVICE! ISAs are one of the best tax free wrappers one can have and this moron says NO!
Thanks Sasha. One slight variation is even if you are making good profit and continue with your holding, sell shares which are generating profits equal to £12500 and buy them next day. That way one can maximise utilizing the 12.5 k yearly allowance. One can also offset some of the losses against the profit and still continue with the positions