If you live in the UK, a Stocks and Shares ISA is usually the first place to put long-term investments. Everything inside it grows free of UK income tax and capital gains tax, and you never need to report it on a tax return.
In short
- You can put up to £20,000 per tax year into ISAs; the 2026/27 tax year runs from 6 April 2026 to 5 April 2027.
- Gains, dividends and withdrawals inside a Stocks and Shares ISA are free of UK tax.
- From April 2027, under-65s can put at most £12,000 a year into cash ISAs, but the overall £20,000 limit stays.
What an ISA is
An Individual Savings Account (ISA) is a tax wrapper, not an investment. You open it with a provider and then choose what goes inside: cash, or investments such as ETFs, index funds and shares. The main types are:
| ISA type | What it holds | Key rules |
|---|---|---|
| Stocks and Shares ISA | Funds, ETFs, shares, bonds | Counts towards the £20,000 allowance |
| Cash ISA | Savings | From 6 April 2027, maximum £12,000 a year for under-65s |
| Lifetime ISA | Cash or investments | Open between 18 and 39; up to £4,000 a year with a 25% government bonus (up to £1,000); for a first home or retirement after 60 |
| Innovative Finance ISA | Peer-to-peer lending | Higher risk |
The £20,000 is a single allowance shared across all your ISAs. Unused allowance does not roll over to the next year.
How much tax does it save?
Outside an ISA, a UK investor pays capital gains tax on profits above the £3,000 annual exempt amount, at 18% or 24% depending on income, plus tax on dividends above the dividend allowance. Inside an ISA, none of this applies, and you do not need to keep records for a tax return.
Over decades, the saving can be large: a portfolio that grows to £200,000 could carry a large unrealised gain that would otherwise be taxed when you sell.
What to hold in a Stocks and Shares ISA
For a simple long-term portfolio:
- A global equity ETF or index fund, such as an all-world ETF. See the best all-world ETFs.
- A UK or global bond fund, if you want to reduce volatility.
UK investors can also buy UCITS ETFs quoted in pounds on the London Stock Exchange. Choose funds with UK reporting fund status, which most popular Irish ETFs have; outside an ISA, it means gains are taxed as capital gains rather than income. See reporting fund status in our tax overview.
Choosing an ISA provider
Look at:
- Platform fee: some charge a percentage of your portfolio, others a flat monthly fee or nothing.
- Dealing costs: commissions per purchase and whether regular investing is free.
- Fund choice: whether your preferred ETF or index fund is available.
- Transfers: whether you can move existing ISAs in without losing the tax wrapper.
Popular low-cost options include commission-free apps such as Trading 212, ETF-focused platforms and fund supermarkets. Compare current fees before you open one; prices change often.
Important rules
- Transfers: always move an ISA using the new provider’s transfer service. If you withdraw the money yourself, it may lose its ISA status and use up new allowance.
- One allowance per tax year: you can split it across ISA types, within the limits above.
- Residency: you need to be UK resident to pay into an ISA. If you move abroad, the existing ISA can usually stay open, but you cannot add new money, and your new country may tax it.
How to start
- Pick a provider and open a Stocks and Shares ISA online.
- Transfer money, or set up a monthly direct debit.
- Choose a global ETF or index fund and set up regular investing.
- Review once a year; use your allowance before 5 April if you can.
New to investing? Start with our index investing guide.
Sources
This article is for educational purposes only and is not financial or tax advice. Tax rules can change and depend on your circumstances.