What is a Stocks and Shares ISA?

Have some cash to invest? One potential option is a Stocks and Shares ISA, which are available in the UK for anyone over 18.

But what is a Stocks and Shares ISA and how does it work? Find out everything you need to know here in this handy guide. We’ll look at ISA allowances, the difference between Cash ISAs and S&S ISAs, and much more.

This isn’t financial advice, just useful information to help you decide if this kind of ISA is right for you.

We’ll also show you a smart, alternative way to make your money work harder with Wise.

With Wise Interest, you can help your money grow by investing in a fund that holds government-guaranteed assets. Simply open a Wise account and turn on Interest to help earn a return on your GBP, EUR and USD. Capital at risk, growth not guaranteed.

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Investments can fluctuate, and your capital is at risk. The Variable rate is based on the performance of the Fund over a 7-day period ending on 9/26/2025. The Fund has achieved an average annual return of 2.76% over a 5-year rolling period exclusive of fees. Interest is offered by Wise Assets UK Ltd, a subsidiary of Wise Payments Ltd. Wise Assets UK Ltd is authorised and regulated by the Financial Conduct Authority with registration number 839689. When facilitating access to Wise investment products, Wise Payments Ltd acts as an Introducer Appointed Representative of Wise Assets UK Ltd. Please be aware that we do not offer investment advice, and you may be liable for taxes on any earnings. If you're uncertain, we urge you to seek professional advice. To find out more about the Funds, visit our website.

What is a Stocks and Shares ISA?

A Stocks and Shares ISA is a type of ISA account designed specially for investments, where you don’t pay tax on any returns you earn. This includes dividend, Capital Gains Tax (CGT) or income tax.¹

It can be thought of as a kind of wrapper, which sits around a portfolio of investments. These may include:¹

• Individual stocks and shares
• Exchange-traded funds (ETFs)
• Government bonds
• Unit and investment trusts.

Every person in the UK aged 18 and over gets an annual ISA allowance - it's currently set at £20,000. You can use some or all of your allowance to invest in a Stocks and Shares ISA.¹

If the value of your investment increases or you receive dividends, you won’t pay tax on the income.

The ISA provider may offer fund options based on your preferred level of involvement and risk.

What’s the difference between Cash ISAs and Stocks and Shares ISAs?

In the UK, a Cash ISA is essentially a savings account for cash, where you don’t pay tax on any interest you earn.

A Stocks and Shares ISA is completely different, as it’s an account for investments where you don’t pay tax on returns.

However, they both have one thing in common - the £20,000 annual allowance, which can be spread across the different types of ISAs available in the UK.

DIY platforms vs. managed Stocks and Shares ISAs

There are a few different types of Stocks and Shares ISAs. You can open one with a bank, or with an investment platform such as Trading 212, Interactive Investor, Nutmeg, Hargreaves Lansdown or AJ Bell.

On these platforms, you can choose between DIY or ‘managed’ ISAs. With the first option, you’ll need to decide what to invest in, build a portfolio and manage it yourself.

Managed ISAs offer a choice of investment portfolios based on your attitude to risk, and the investments are managed by an expert - although there are some providers who use automated or ‘robo’ services.

These can be more expensive in terms of fees, but all the work is done for you.

Key points to remember about Stocks and Shares ISAs

Here are some quick takeaways to remember about Stocks and Shares ISAs in the UK:

• Stocks and Shares ISAs are a ‘wrapper’ for investments, unlike Cash ISAs which are savings accounts for cash
• Gains from Stocks and Shares ISAs are free from dividend, Capital Gains Tax (CGT) or income tax.
• All UK people over 18 have an annual ISA allowance of £20,000
• You can spread this allowance across different ISAs, including Stocks and Shares ISAs
• You have a choice of DIY or managed investment portfolios
• As with all investments, your capital is at risk with S&S ISAs.

Remember, there are alternative ways to grow your money. Open a Wise account and switch on Wise Interest to earn returns on your GBP, EUR and USD. With Wise Interest you can continue to send, spend and access your money, though it does not come with the same tax advantages as a S&S ISA, so you will need to weigh up what is right for you.

Investments can fluctuate, and your capital is at risk. The Variable rate is based on the performance of the Fund over a 7-day period ending on 9/26/2025. The Fund has achieved an average annual return of 2.76% over a 5-year rolling period exclusive of fees. Interest is offered by Wise Assets UK Ltd, a subsidiary of Wise Payments Ltd. Wise Assets UK Ltd is authorised and regulated by the Financial Conduct Authority with registration number 839689. When facilitating access to Wise investment products, Wise Payments Ltd acts as an Introducer Appointed Representative of Wise Assets UK Ltd. Please be aware that we do not offer investment advice, and you may be liable for taxes on any earnings. If you're uncertain, we urge you to seek professional advice. To find out more about the Funds, visit our website.

Sources used:

1. MoneySavingExpert - Stocks & shares ISAs

Sources last checked on date: 18-Mar-2025