How much can I invest in a stocks and shares ISA?

With the rates of Capital Gains Tax increasing in the October 2024 budget, being smart with your investments is more important than ever. Using a stocks and shares ISA will make sure any gains are shielded from capital gains and UK income tax. But you’ll need to be aware of how much you can pay in, and when, so you don’t lose those tax benefits. We’ve got the information you’ll need.

For the 2024/2025 tax year in the UK, the annual ISA allowance is £20,000. This total applies across all ISA types, including cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs. You can also open a Junior ISA for a child (if you're their legal guardian). This has a separate allowance of £9,000.

Annual ISA allowance for stocks and shares ISAs

If you’re focused on investing you can put your entire allowance into to a stocks and shares ISA – that gives you £20,000 every year to build your portfolio. 

The value of investments can fall as well as rise – and you may get back less than you’ve invested. 

How the allowance is shared across different ISAs

You can use your allowance for a single ISA or split it across any that you have – as long as the total you pay in isn’t more than £20,000 in any tax year. 

A Lifetime ISA is a special case, designed for first-home buyers and retirement. It has a cap of £4,000 per year, which counts towards the £20,000 limit. So, if you invest £4,000 in a Lifetime ISA, you’d have £16,000 available to split between other ISAs. You can find more information on ISA allowances here.

While your overall ISA allowance is £20,000 you’re free to use that money in a way that suits you. 

If you want to keep some funds easily accessible and safe from market ups and downs, you might place £10,000 in a cash ISA for security and easy access. You can then put the remaining £10,000 into a stocks and shares ISA, aiming for potential growth in the stock market over the long term. 

Alternatively, if you’re happier with more risk, you could pay £15,000 into a stocks and shares ISA, leaving £5,000 in a cash ISA, so you have some money in a safer place. 

This flexibility to choose where you put your money lets you create a personal investment plan based on your needs.

Benefits of investing in a stocks and shares ISA

The aim of investing for the long term is to get the best return possible. A stocks and shares ISA can help with that. With non-ISA investments you may have tax to pay. That can be Capital Gains Tax when you sell or tax on dividend payments. Those deductions cut into your profit and lower your return.

With a stocks and shares ISA, you won’t have those deductions from your profits, so it improves your chance of bigger returns over time. 

Tax benefits are based on individual circumstances and are subject to change. 

Changes in ISA regulations

From 6 April 2024, new rules mean that you can open and pay in to multiple ISAs of the same type within the same tax year – apart from Lifetime ISAs. So, you can open as many cash ISAs or stocks and shares ISAs as you want and split your money between them – as long as you don’t go over £20,000. 

The benefit of this is that you can take advantage of using different providers, giving you more flexibility. For example, if you’ve opened a cash ISA already and see another with a better rate, you can apply for it. It also gives you the freedom to invest with a new provider, even if you already have a new stocks and shares ISA.

To open an ISA you must be a UK resident aged 18 or over. Before 6 April 2024, 16 and 17 year olds could apply for a cash ISA and there are transitional arrangements in place.

For the 2024/2025 tax year, the total ISA contribution limit is £20,000 across all ISAs, allowing flexibility to split this amount between different types. While you can contribute to multiple ISAs of the same type (except for Lifetime ISAs), your total contributions must not exceed the annual limit.

Withdrawals are generally allowed at any time from cash, stocks and shares, and innovative finance ISAs without tax consequences. Some ISAs, like the Aviva Stocks & Shares ISA, also give you the flexibility to withdraw money and pay it back in the same year, without it affecting your annual allowance. 

Lifetime ISAs come with more restrictions. You can only open one if you’re between 18-39 and can only pay in until you’re 50. They also carry a 25% penalty on withdrawals before age 60 unless the money is used to buy your first home – so if you don’t meet those conditions you could end up with less money than you’ve put in.

Choosing between the right ISA will depend on your goals. If you qualify for a Lifetime ISA the bonus you’ll receive can help you save for a home or retirement. If your choice is between a cash ISA and stocks and shares ISA, you should consider a couple of things.

Risk

Cash ISAs offer fixed or variable interest and they're covered by by the FSCS up to £85,000 for each banking group you use. So they’re a low-risk way to grow your money. Stocks and shares ISAs can offer potentially higher returns as your money is invested in the stock market, but that also comes with higher risks as your investments could fall in value.

Time

If you’re saving for short-term goals, like a holiday or a car, a cash ISA may be the better choice, as your money will be there when you need it. A stocks and shares ISA is better for building your wealth over a long time, as it gives you a better chance of riding out any ups and downs in the markets. 

We have more information on using a cash ISA versus a stocks and shares ISA here. 

If you’re not sure if a stocks and shares ISA is right for you, we’d recommend speaking to a financial adviser. You can find one at Unbiased – there will be a charge for advice.