What is a Stocks and Shares ISA?
A Stocks and Shares ISA is an ISA that holds investments, such as shares, funds and bonds, with no tax on the income or capital gains from them. With investments your capital is at risk: their value can fall as well as rise, and you may get back less than you put in.
The short answer
- A Stocks and Shares ISA is a tax-free wrapper for investments. gov.uk says there is no tax on income or capital gains from investments in an ISA, and nothing to declare on a tax return.
- You can pay in up to £20,000 a tax year, from 6 April to 5 April, across all your ISAs, and you can split it across ISA types. A Stocks and Shares ISA can include shares in companies, investment funds and bonds.
- Your capital is at risk. The value of investments can fall as well as rise, and you may get back less than you put in. A Cash ISA's balance does not fall because of market movements, while the value of investments can.
- A 22% charge on interest from cash held inside a Stocks and Shares ISA was planned for April 2027. It is unconfirmed after the Budget. This page is information, not advice, and names no provider, platform or fund.
What is a Stocks and Shares ISA?
A Stocks and Shares ISA is an ISA that holds investments, such as shares, funds and bonds. The ISA is a tax wrapper around them. It changes how income and gains are taxed, not how the investments perform, so with investments your capital is at risk.
Stocks and Shares ISA, at a glance
- ISA allowance, all your ISAs together
- £20,000
- A tax year, from 6 April to 5 April
- Tax on income and capital gains from investments inside the ISA
- None
- Nothing to declare on a tax return
- Dividend allowance outside an ISA, 2026/27
- £500
- Dividends above it can be taxed
- Capital Gains Tax annual exempt amount outside an ISA, 2026/27
- £3,000
- Gains above it can be taxed
How does a Stocks and Shares ISA work?
A Stocks and Shares ISA uses your yearly ISA allowance and puts a tax wrapper around the investments inside it.
The allowance. gov.uk says you can pay up to £20,000 a tax year across your ISAs. A tax year runs from 6 April to 5 April. The limit covers all your ISAs together, and you can split it across ISA types, for example between a Stocks and Shares ISA and a Cash ISA. See the ISA allowance.
The wrapper and the tax. The investments sit inside the ISA, which is a tax wrapper. gov.uk says there is no tax on income or capital gains from investments in an ISA, and nothing to declare on a tax return.
How much tax can an ISA save?
Inside a Stocks and Shares ISA, income and capital gains from investments are not taxed. Outside one, allowances cover the first part of some income and gains, and the rest can be taxed. The dividend allowance is £500 a tax year, and the Capital Gains Tax annual exempt amount is £3,000.
An ISA saves tax only where tax would otherwise be due. Dividends and gains that stay within those amounts are not taxed outside an ISA either, so for them the ISA saves nothing.
An illustration. This is not a forecast and is not tied to any account or person. It takes £1,000 of dividends and £5,000 of capital gains in one tax year, held outside an ISA. The dividend allowance covers the first £500 of the dividends, and the annual exempt amount covers the first £3,000 of the gains. The amounts are examples, not typical figures.
| Held outside an ISA, in one tax year | Covered by the allowance | Above the allowance, can be taxed | The same amount inside a Stocks and Shares ISA |
|---|---|---|---|
| £1,000 of dividends | £500 | £500 | No tax |
| £5,000 of capital gains | £3,000 | £2,000 | No tax |
The tax charged on the amount above an allowance depends on your circumstances. Tax treatment may change.
What can a Stocks and Shares ISA hold?
gov.uk says a Stocks and Shares ISA can include:
- shares in companies
- unit trusts and investment funds
- corporate bonds
- government bonds
- long-term asset funds
HMRC’s guidance for ISA managers sets out the qualifying investments in more detail. Its list includes shares, company securities, government securities, UK UCITS funds and qualifying non-UCITS retail schemes, qualifying investment trusts, recognised overseas UCITS funds, cash, certain life insurance policies and long-term asset funds. These are HMRC’s own terms. An index tracker fund or an ETF can be held if it is a qualifying investment: see index tracker and ETF ISAs.
Shares. HMRC says shares qualify if they are issued by a company incorporated anywhere in the world and are either officially listed on a recognised stock exchange or admitted to trading on a recognised stock exchange in the UK or the European Economic Area (EEA). Choosing and buying shares yourself is covered in share dealing ISAs.
Cash. Cash is on HMRC’s list, so a Stocks and Shares ISA can hold it. A planned 22% charge on interest on that cash is unconfirmed after the Budget: see the section on 2027 below.
Crypto notes. gov.uk says cryptoasset exchange traded notes cannot be held in a Stocks and Shares ISA unless they were held there before 6 April 2026. See can you hold crypto in an ISA.
Shares you already own. gov.uk says you cannot transfer non-ISA shares you already own into an ISA unless they are from an employee share scheme.
What can you hold in an ISA covers the full picture, across every ISA type.
How does it differ from a Cash ISA?
The main difference between a Stocks and Shares ISA and a Cash ISA is what is inside. A Cash ISA’s balance does not fall because of market movements, though inflation can reduce what it is worth. A Stocks and Shares ISA holds investments, and the value of investments can fall as well as rise. Cash and investments carry different risks, and which matters more depends on your circumstances.
Both count towards the same £20,000 allowance, and you can split it between them.
| Point of comparison | Stocks and Shares ISA | Cash ISA |
|---|---|---|
| What it holds | Investments, such as shares, funds and bonds | Cash savings |
| Can the value fall? | Yes. The value of investments can fall as well as rise, and you may get back less than you put in. | Not because of market movements, though inflation can reduce what it is worth. |
| Counts towards the £20,000 allowance? | Yes | Yes |
| What the Budget changed for 2027 | A planned 22% charge on interest on cash held inside it is unconfirmed. | A planned cut of the limit to £12,000 for under-65s was cancelled. The limit stays £20,000. |
Cash ISA or Stocks and Shares ISA compares the two on risk, access and FSCS protection. This page does not say which suits you.
What does a Stocks and Shares ISA cost?
Platforms and funds charge fees, which reduce returns. Our Stocks and Shares ISA calculator shows growth after fees at illustrative rates. Those rates are examples, not forecasts. You can compare platform fees on our platform page, which gives factual charge data, not advice.
What are the risks?
The value of investments can fall as well as rise, and you may get back less than you put in. Past performance is not a reliable guide to the future. The ISA changes how investments are taxed, not how they perform, and fees reduce returns.
A Cash ISA’s balance does not fall because of market movements, while the value of investments can. Money needed soon may be better held in cash. That is general information, not a recommendation, and it depends on your own circumstances.
Can you move it to another provider?
Yes. You can move a Stocks and Shares ISA to another provider without losing the tax wrapper. See how an ISA transfer works, including how a transfer differs from withdrawing money and paying it into a new ISA.
A planned block on savers under 65 transferring a Stocks and Shares ISA into a Cash ISA is unconfirmed after the Budget. See ISA transfers.
What is planned for 2027?
HMRC had planned that, from 6 April 2027, a 22% charge would apply to interest on cash held inside a Stocks and Shares ISA, at every age, that money market funds would be the only investments counted as cash-like, and that savers under 65 could not transfer into a Cash ISA. The Budget documents on 28 October 2026 do not mention these rules, and press reports say they are not going ahead as planned, so we treat them as unconfirmed. See cash inside a Stocks and Shares ISA.
Planned for 6 April 2027, unconfirmed
- Charge on interest from cash held inside a Stocks and Shares ISA
- 22%
- Planned, not in the Budget documents
- Investments counted as cash-like
- Money market funds only
- Planned, unconfirmed
- Moving a Stocks and Shares ISA into a Cash ISA
- Planned block
- For under-65s, unconfirmed
The Budget did cancel the planned cut of the Cash ISA limit to £12,000, so the Cash ISA limit stays £20,000. See the Cash ISA limit. Tax treatment depends on your circumstances and may change.
How do you open a Stocks and Shares ISA?
You open one with an ISA provider. Our guide to how to open an ISA covers who can open one, what a provider asks for and how to apply. This page does not name or recommend any provider.
Questions people ask
Do you pay tax on a Stocks and Shares ISA?
No. gov.uk says there is no tax on income or capital gains from investments in an ISA, and nothing to declare on a tax return. Outside an ISA, the dividend allowance is £500 a tax year and the Capital Gains Tax annual exempt amount is £3,000, so dividends and gains above those amounts can be taxed. An ISA saves tax only where tax would otherwise be due. Tax treatment depends on your circumstances and may change.
How much can you put into a Stocks and Shares ISA?
Up to £20,000 a tax year, from 6 April to 5 April, across all your ISAs. gov.uk says you can split that across ISA types, so £20,000 is the limit for all your ISAs together, not for each one. See how the ISA allowance works.
Can you lose money in a Stocks and Shares ISA?
Yes. The value of investments can fall as well as rise, and you may get back less than you put in. Past performance is not a reliable guide to the future. The ISA changes how investments are taxed, not how they perform, and fees reduce returns. A Cash ISA's balance does not fall because of market movements, so money needed soon may be better held in cash. That is general information, not a recommendation.
What can you hold in a Stocks and Shares ISA?
gov.uk says a Stocks and Shares ISA can include shares in companies, unit trusts and investment funds, corporate bonds, government bonds and long-term asset funds. Cryptoasset exchange traded notes cannot be held in one unless they were held there before 6 April 2026. You also cannot transfer non-ISA shares you already own into an ISA unless they are from an employee share scheme. See what you can hold in an ISA.
What changes for Stocks and Shares ISAs in April 2027?
HMRC had planned a 22% charge on interest on cash held inside a Stocks and Shares ISA from 6 April 2027, a rule that money market funds would be the only cash-like holdings, and a block on transfers into Cash ISAs for under-65s. The Budget documents on 28 October 2026 do not mention them, and press reports say they are not going ahead as planned, so they are unconfirmed. See cash inside a Stocks and Shares ISA and ISA transfers.
Sources
- 1 Individual Savings Accounts: how ISAs work (GOV.UK) (gov.uk)
- 2 Stocks and shares ISA investments for ISA managers (HMRC guidance, GOV.UK) (gov.uk)
- 3 Individual Savings Accounts: transferring your ISA (GOV.UK) (gov.uk)
- 4 Changes to tax rates for property, savings and dividend income (HM Treasury, 26 November 2025) (gov.uk)
- 5 Capital Gains Tax allowances (GOV.UK) (gov.uk)
- 6 ISA reform 2027: anti-circumvention rules factsheet (HMRC, 23 June 2026) (gov.uk)
- 7 Tax-free savings newsletter 22 (HMRC, June 2026) (gov.uk)
- 8 Cash ISA limit reduction: tax information and impact note (HMRC, 17 September 2026) (gov.uk)