eToro: Buy Shares with 0% Commission

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Best Stocks and Shares ISA 2021 – Which is the Highest Performing?

If you’re based in the UK and looking to invest in the financial markets, a stocks and shares ISA is a great option. This is because you can invest up to £20,000 and pay no tax whatsoever on your investments! In this guide, we explore the UK’s best stocks and shares ISAs of 2021.

On top of discussing the best providers currently active in the market, we also give you some handy tips on how stocks and shares ISA work.


The Best Stocks and Shares ISA Accounts for 2021

Let’s briefly run through the 11 best stocks and shares ISA accounts and then we’ll dive into detailed reviews of each:

  1. Fineco Bank – Overall the Best Stocks and Shares ISA in the UK – Invest Now
  2. Hargreaves Lansdown – Stocks and Shares ISA with Ready-made Portfolios
  3. HalifaxBest Stocks and Shares ISA for Beginners
  4. Interactive InvestorBest Performing Stocks and Shares ISA
  5. AJ BellBest Junior Stocks and Shares ISA
  6. BarclaysBest Low-cost Stocks and Shares ISA
  7. The Share CentreBest Stocks and Shares ISA Platform
  8. SantanderBest Stocks and Shares ISA for Personalised Advice
  9. VanguardBest Stocks and Shares ISA for ETF Investing
  10. FidelityBest Stocks and Shares ISA for Mutual Fund Investing
  11. HSBCBest Stocks and Shares ISA with a Low Minimum Deposit

eToro vs Stocks and Shares ISAs

eToro doesn’t actually offer a stocks and shares ISA account, but we still think it’s the best platform for stock investing in the UK. The main reason for this is that it is one of very few platforms that allows you to buy and sell stocks with no commission whatsoever.

Let’s put this into perspective. Virtually all stocks and shares ISAs charge a per-trade commission, which is often over £10. On top of that, most platforms also charge an annual account fee. In comparison, eToro doesn’t charge any fees whatsoever for investing in stocks, apart from a $5 withdrawal fee. So, even though stocks and shares ISAs offer tax-free alternative, you could actually end up saving money with eToro due to its zero commission rule.

Like most stocks and shares ISAs, eToro allows you to do your own investing or investing in professionally managed stock portfolios. These are a fusion of expert human management and machine learning and are an excellent choice if you want to invest passively.

Investors with shorter time horizons may find eToro’s easy-to-use commission-free dealing platform attractive, especially if they envisage being frequent traders. Also, if you are an investor with much less than the £20k annual allowance to invest, then making use of your annual £12,300 capital gains tax allowance after opening one of eToro’s thematic portfolios or creating your own, maybe a good option

On top of that, eToro is the world’s leading social trading platform. It provides a social network on which you can interact with other investors, and you can even copy their portfolios with no extra charge. This means the eToro platform offers far more than a standard stocks and shares ISA. And if you want to stick with eToro as you grow into your investing journey, if you are married or in a civil partnership you can make use of your spouse’s unused CGT allowance to double (£24,600) your tax-free allowance – that’s £4,600 more than available through an Isa (£20,000)

eToro is licensed by the FCA, so you needn’t have any concerns about the safety of your funds. It’s also much more flexible when it comes to payments. While most stocks and shares ISAs only accept bank cards or transfers, eToro allows you to use e-wallets such as PayPal and Neteller. If you want to get a hands-on feel for eToro before funding an account – hop over and try the demo account where you can get up to speed at your own pace.

67% of retail investor accounts lose money when trading CFDs with this provider.


Best Stocks and Shares ISAs 2021

As noted earlier, investing in a stocks and shares ISA means signing up with a UK stock broker. As such, you need to do some homework to ensure the platform is right for you and your long-term investing goals.

To help point you in the right direction, below we list 11 of the best stocks and shares ISAs of 2021.

1. Fineco Bank – Overall the Best Stocks and Shares ISA in the UK

fineco-bank-logoFineco Bank is our top pick for anyone in search of the best UK stocks and shares ISA. The broker currently has a promotion that offers zero account fees when you open a new ISA, and the account fee is just 0.25% of your total portfolio once the promotion ends. On top of that, investing in ETFs with Fineco Bank is always free and there’s no exit fee if you want to transfer your ISA in the future.

Fineco Bank gives you access to thousands of individual shares and ETFs, so you can put together your own custom portfolio. Share dealing costs just £2.95 per deal for UK shares and $3.95 per deal for US shares, making Fineco Bank far cheaper for active investing than any of the other stocks and shares ISAs we’ve reviewed. You can open a new ISA and start investing with as little as £100.

Another thing we love about Fineco Bank is that you can easily manage your stocks and shares ISA online or through the broker’s mobile app. It’s easy to buy and sell funds on the go, and you can use the global fund screener to find investment ideas.

Overall, we think Fineco Bank is the best stocks and shares ISA in the UK for 2021.

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2. Hargreaves Lansdown – Stocks and Shares ISA with Ready-made Portfolios

hargreaves-logoHargreaves Lansdown is a market leader in the UK brokerage scene. On top of a fully-fledged research department and highly extensive offering of equities, the platform offers stocks and shares ISAs. You have two options when it comes to investing with a Hargreaves Lansdown stocks and shares ISA – DIY or ready-made portfolios.

If opting for the former, you will be selecting from over 2,500 shares, funds, and trusts yourself, meaning you retain full control of where your money goes. Helpfully, the broker offers fund shortlists for popular investment types like Funds for Income, Seeking Retirement Income Funds, and Established Trackers. Hargreaves Lansdown does offer individual stock investing, but the research tools available for this purpose are relatively limited.

You can invest in a Hargreaves Lansdown stocks and shares ISA from just £100. Alternatively, the broker lets you get started from £25 per month if you set up recurring investments. If opting for a ready-made portfolio, Hargreaves Lansdown will create a basket of shares on your behalf – based on your investment needs and attitude to risk.

This requires a minimum investment of £1,000. Both options carry an annual charge of 0.45%, and you then need to take share dealing charges into account. This can be as high as £11.95 at Hargeaves, so do bear this in mind.

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3. Halifax – Best Stocks and Shares ISA for Beginners

logo-halifaxHalifax Bank offers a stocks and shares ISA to customers and non-customers alike. The broker is a subdivision of Lloyds, the investment giant, but it’s operated wholly independently and is much more geared towards long-term investors.

Halifax is most suitable for those of you that don’t want to be inundated with too much choice. That is to say, Halifax offers a relatively small selection of investment options, as well as three ready-made portfolios. In total, the broker has around 2,000 mutual funds, 575 exchange-traded funds (ETFs), and nearly 300 investment trusts.

In terms of fees, there is a 0.24% platform charge and a 0.25% charge if using the fund management services. When it comes to share dealing charges, this stands at £12.50 per trade. There’s also an additional charge for buying shares listed outside the UK. This can make it somewhat expensive if you are looking to invest small amounts.

There are no early account closure fees at Halifax, so you can take your money out whenever you see fit. That makes the experience relatively risk-free.

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4. Interactive Investor – Best Performing Stocks and Shares ISA

Interactive Investor is an online stock broker that offers one of the best performing stocks and shares ISA plans. With this broker, you get access to over 40,000 investment options. This includes a full library of UK and international stocks, as well as ETFs and funds. You can also invest in US stocks with the Interactive Investor stocks and shares ISA, which is a plus for more aggressive investors.

In terms of pricing, Interactive Investor might be suitable for you if you are looking to invest on a monthly basis. That is to say, you plan to trade once per month. This is because the broker charges a hefty monthly fee of £9,99, but, this allows one free trade per month. As such, you aim to purchase shares in one company per month, you are effectively paying £9.99 per order. While that’s not cheap, it’s very competitive compared to brokers like Halifax.

The platform has been in business for over three decades, and it also offers market insights to help you in the decision-making process. You can also take advantage of automatic dividend reinvestment and recurring monthly investment.

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5. AJ Bell – Best Junior Stocks and Shares ISA

AJ Bell offers one of the best Junior Stocks and Shares ISA accounts in addition to standard ISAs. It can be opened in just a few minutes and you can invest up to £9,000 per year tax-free.

In addition, while some UK investors like to inject a one-off lump sum, others prefer to pay a bit at the end of each month. If the latter sounds like you, then it might be worth considering AJ Bell. This is because the share dealing platform offers one of the best performing stocks and shares ISA accounts and allows you to pay just £1.50 when you set up a monthly direct debit.

You can actually do this from just £25 per month, which is great if you only have a small amount to invest.  In terms of investment options, you’ll have access to a wide range of stocks and shares, and over 2,000 ETFs, investment trusts, and funds.

If you have more than £4,000 in your AJ Bell stocks and shares ISA, you will get free access to the platform’s Shares magazine. You will have full control over your investments, which you execute online or via the broker’s mobile app. Best of all, if you are looking to transfer your stocks and shares ISA from another provider, AJ Bell will cover the costs up to the first £500.

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6. Barclays – Best Low-cost Stocks and Shares ISA

logo-barclaysMuch like Halifax, Barclays is a UK bank that offers one of the best performing stocks and shares ISA accounts. Its platform is super basic to use, so you don’t need to have any prior experience of buying and selling shares online. Although the fee structure at Barclays is somewhat confusing at first glance, it does work out fairly competitive – especially in terms of annual fees.

So, funds work out at just 0.2% per year, which is much cheaper than the 0.45% charged by Hargreaves Lansdown. Flat customer fees amount to a minimum of £4. But, all customer fees (including the annual fund charge) is capped at £125 month. That’s pretty fair in our opinion.

When it comes share dealing charges, standard stocks and shares cost £6 per trade, while funds are cheaper at £3 per trade. If you place your orders over the phone, an additional transaction fee of £25 will apply. Much like AJ Bell, Barclays will credit any transfer fees that are charged by your prior provider up to the first £500.

Barclays has over 2,000 funds to choose from, plus stocks from more than 35 exchanges around the world. Beginner investors can also take advantage of 5 ready-made funds designed for any investing goal.

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7. Wealthify – Best Stocks and Shares ISA Platform

Wealthify Logo

Wealthify is an automated investment platform, also known as a robo advisor, launched in 2016. The platform helps UK residents effortlessly invest for retirement by offering several types of risk-balanced, long-term portfolios. As your investments grow, Wealthify keeps your portfolio in balance and makes adjustments as needed over time.

Wealthify was acquired by Aviva in 2017 and now operates as a subsidiary of the UK insurance giant. However, Wealthify continues to operate independently and is run by its original leadership team. Wealthify does not publicize its total assets under management, but the platform has over 30,000 users in the UK.

Wealthify offers a Stocks and Shares ISA account, which is free from capital gains tax. However, you can only deposit up to £20,000 per year in an ISA. There are no limits on when you can withdraw the money or what you can use it for.

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8. Santander Stocks and Shares ISA – Best Stocks and Shares ISA for Personalised Advice

The Santander stocks and shares ISA is a flexible account that offers several different ways to invest. If you want to make investing as simple as possible, Santander offers 4 pre-made investment funds for you to choose from. On the other end of the spectrum, Santander has a self-directed investment hub where you can choose from thousands of stocks, ETFs, mutual funds, and more. You’ll find shares not only from the UK, but also from all of the major US, European, and Asian stock exchanges.

In between, Santander has tier of assisted investing. You can get personalised advice from a Santander financial advisor to build the portfolio that best suits your investing goals. This service isn’t free with your account, but it can be much cheaper than paying for an outside financial advisor. In fact, if you want help putting together your investment portfolio, Santander’s stocks and shares ISA is one of the most cost-effective options around.

Santander allows you to start investing with a minimum deposit of £5,000 or a monthly recurring investment of £20. If you want to take advantage of face-to-face financial advice, you must have at least £20,000 in your ISA. The provider charges a 0.35% annual fee on the first £50,000 in your ISA.

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9. Vanguard – Best Stocks and Shares ISA for ETF Investing

If you don’t have the required knowledge to invest on a DIY basis or you simply don’t have enough time to devote to the research process, you might be best with an index fund or ETFs. This means that the provider in question will buy and sell shares on your behalf. If this is something that you are interested in, it might be worth considering the Vanguard stocks and shares ISA.

The provider is one the largest and most prevalent in the global fund scene, so it is notable that you can invest directly. You will have access to over 75 funds, all of which are personally managed by the team at Vanguard. This particular stocks and shares ISA is also one of the most cost-effective.

This is because you will pay just 0.15% per year in account fees. Any buy and sell trades that Vanguard performs on your behalf will not subject to a flat trading fee like you would have to pay elsewhere. In terms of account minimums, you can invest a lump sum of £500 or more, or commit to a monthly direct debit of £100.

Overall, these terms make Vanguard one of the cheapest platforms for long-term investing. However, note that the selection of individual shares is limited, so Vanguard might be less than ideal if you want to put together a hand-picked portfolio.

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10. Fidelity – Best Stocks and Shares ISA for Mutual Fund Investing

Much like in the case of Vanguard, Fidelity is a global leader in the ETF and fund space. With that said, the platform has since opened its doors to the stocks and shares ISA arena. By opening an account, you will have access to heaps of funds from a variety of markets. You can also invest in traditional shares, too, so you get the best of both worlds and ensures that you have a vast variety of assets to add to your ISA.

One thing that’s worth noting about Fidelity is that the brokerage is taking over ISAs from Legal and General, one of the UK’s biggest investment firms. Legal and General is not accepting new ISA accounts at this time, and all current accountholders are being moved to Fidelity. We think this will make Fidelity even better, since the broker will want to cut fees and add offerings in order to retain all those new ISA accountholders. We expect the selection of UK shares and investment trusts might increase as well.

Once again, you will be going directly with the provider when investing in funds. Fees are somewhat reasonable, although they could be cheaper. This is because you will pay 0.35% per year – but only if you invest £7,500. Alternatively, you can get this rate if you set up a regular, monthly savings plan.

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11. HSBC Stocks and Shares ISA – Best Stocks and Shares ISA with a Low Minimum Deposit

If you want to open one of the best performing stocks and shares ISA accounts but don’t have thousands of pounds to stash away right now, take a look at HSBC. This bank and brokerage firm allows you to open a stocks and shares ISA with just £50 if you want investment advice and just £100 if you want to direct your own investment strategy. The firm charges a 0.5% fee for investment advice, which also makes it a fairly affordable option for new investors to get into the market.

HSBC has a somewhat limited selection of funds to choose from if you plan to use the company’s advice. There are 450 investment funds available in the HSBC Global investment Centre. That’s a fraction of what other brokers offer, although it’s worth pointing out that many of the funds on HSBC’s lists are top performers in their categories.

If you’re choosing your own investments, you have access to thousands of shares and ETFs from the UK, US, and around the world. HSBC charges a dealing fee of £10.50 per trade for UK shares and a quarterly account fee of £10.50. These charges aren’t cheap, particularly if you’re buying shares in small increments.

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What is a Stocks and Shares ISA?

In its most basic form, an Individual Savings Account, or simply ISA, is a government initiative that aims to promote investments. That is to say, you will have the chance to shield some of your investment-related tax obligations – up to a certain amount each year.

While there are several ISAs to choose from, a stocks and shares ISA is what you will want to look at if you plan to invest in the stock markets. In the 2020/21 tax year (6th April 2020 to 5th April 2020), your stocks and shares ISA comes with a limit of £20,000.

In other words, the first £20,000 that you invest in the stock markets will not be liable for tax. Ordinarily, gains that you make from a share investment would be liable for capital gains tax and dividends tax. Regarding the former, this is the amount of money that you make when you sell your shares. For example, if you buy £2,000 worth of BP shares and sell them for £3,000 – your capital gains are £1,000.

Without the aid of an ISA, you might be required to pay tax on this £1,000, depending on your individual circumstances. When it comes to dividends, anything you make after the first £2,000 would also be liable for tax. Once again, making use of a stocks and shares ISA means that you can shield these tax obligations, up to the first £20,000.

How do Stocks and Shares ISAs Work?

Before we run you through a numerical example of how a stocks and shares ISA works, it is important to explain the fundamentals. That is to say, stocks and shares ISAs are simply dedicated brokerage accounts. For example, let’s suppose that you open an account with Hargreaves Lansdown.

In doing, you would have access to both an ordinary brokerage account and a stocks and shares ISA account. Although this means that you will be picking and choosing shares on a DIY basis, the first £20,000 will go through the ISA. Anything after that will be liable for capital gains and dividends tax in the standard way.

Ultimately – and as we discuss in more detail later on, the ISA you go with will be based on underlying broker. For example, you’ll need to explore metrics such as share dealing fees, the types of stocks you can invest in, customer support, and whether the platform is regulated and protected by the FCA/FSCS.

Nevertheless, here is a super-basic example of how a stocks and shares ISA works.

Example of Stocks and Shares ISA

  • You open a stocks and shares ISA with your chosen broker
  • You invest £5,000 into Tesco, HSBC, Royal Mail, and Netflix.
  • This means that you have invested a total of £20,000 – which equals your full stocks and shares ISA allowance for the year
  • At the end of year one, your £20,000 portfolio is now worth £25,000
  • You have also received £3,000 in dividend payments
  • If you were to sell your holdings, your overall investment is now worth £28,000 (£25,000 share value + £3,000 dividends)
  • As this £28,000 is based on your original £20,000 ISA allowance, you would not need to pay any capital gains or dividends tax on your earnings

Ordinarily, the £8,000 gains that you made (£5,000 + £3,000) likely would have been liable for tax. But, by utilizing your full ISA allowance, you were able to shield these profits.

Read our comprehensive guide on tax on shares here.

Benefits of Stocks and Shares ISAs

Still not sure whether a stocks and shares ISA is right for you? Below we list some of the main benefits to consider.

  • Tax-Efficient: It can be super frustrating to see your investments grow, only to then lose a chunk of your profits through capital gains and dividends tax. As we have already noted, the main benefit of a stocks and shares ISA is that you will get to shield the first £20,000 from HMRC. By investing in shares outside of an ISA, you will all-but-certainly need to pay something to the taxman.
  • Annual Allowance Refreshes Each Year: It is important to note that you will get a new stocks and shares ISA allowance every year. So, if you reach your £20,000 limit in the 2020/21 tax year, you can invest an additional £20,000 the following year. The figures for 2022/23 are yet to be announced by the government, so it is hoped that an increased allowance comes into play.
  • Heaps of Brokers to Choose From: With stocks and shares ISAs being a no-brainer for UK investors, more and more stock brokers are offering dedicated ISAs. As such, finding the best performing stocks and shares ISA that meets your needs should no longer be an issue.
  • Compound Interest, Tax-Free: Let’s suppose that you invest £20,000 into your ISA in 2021, and then leave the respective stocks and shares untouched for the next 20 years. Based on a theoretical annualized average return of 7.75% on the FTSE 100, your money would be worth just under £90,000 – and that’s without taking dividends into account. As such, when you eventually came around to selling the shares, you would be able to do so without paying a single penny in capital gains tax!
  • Safe and Regulated: Online brokers offering stocks and shares ISAs to UK investors must be in receipt of an FCA license. In the vast majority of cases (check this before taking the plunge), this also means that your funds will be protected by the FSCS. This means that were the broker to go bust, the first £85,000 would be safeguarded.

Pros and Cons of Stocks and Shares ISAs

Pros:

  • Capital gains are 100% tax-free
  • Dividends are taxed at reduced rate
  • Invest in individual stocks, mutual funds, ETFs, and investment trusts
  • Potentially higher returns compared to Cash ISA
  • Protected by the Financial Services Compensation Scheme

Cons:

  • Losses cannot offset gains in other accounts
  • Many ISAs have monthly fees
  • Relatively high minimum investment amounts

How Much Does a Stocks and Shares ISA Cost?

One of the potential downsides to investing through the best stocks and shares ISAs is that they come with fees. Most stocks and shares ISAs charge a commission on every trade you make as well as an annual account fee. In addition, there may be a fee if you don’t place any trades for a length of time (an inactivity fee).

Let’s see how the best stocks and shares ISAs match up against each other in terms of fees.

Charge per Trade (shares) Annual account fee Inactivity Fee
Fineco Bank £2.95 (UK shares) Free until April 2022, then 0.25% on first £250,000 None
Hargreaves Lansdown £5.95 –  £11.95 depending on number of trades in previous month 0.45% on first £250,000 None
Halifax £12.50 £12.50 £10 after 12 months
Interactive Investor £7.99 £199.88 £10 after 24 months
AJ Bell £4.95 – £9.95 depending on number of trades in previous month £0.25% £10 after 24 months
Barclays £6 £0.1% £10 after 24 months
Wealthify £7.50 (or 1% for trades above £750) £60 £10 after 24 months
Santander £2.95 £0.35% £10 after 24 months
Vangaurd £0 0.15% £10 after 24 months
Fidelity £10 £45 or 0.35% £10 after 24 months
HSBC £10.50  £42 None

What Type of Investments Can You Invest in with a Stocks and Shares ISA?

As the name suggests, a stocks and shares ISA enables you to invest in stocks and shares. But that doesn’t mean you’re only limited to picking individual stocks. Let’s take a look at some of the types of assets you can invest in with the best stocks and shares ISAs:

  • Stocks or shares: Shares are slices of ownership in an individual company. Buying individual shares can be riskier than buying funds, but you can buy shares of multiple companies to build your own custom portfolio.
  • ETFs: Exchange-traded funds are baskets of stocks. They may seek to track the performance of a market index like the FTSE 100, or they could invest in companies that fit into a specific market sector or theme. Typically, ETFs have low ongoing management fees.
  • Investment funds: Also known as mutual funds, these are collective investments in which you pool your money with other investors. A fund manager then invests that money on all the investors’ behalf. Investment funds can invest in not only stocks, but also real estate, bonds, art, or riskier investments. They typically charge higher fees than ETFs.
  • Investment trusts: Investment trusts are publicly-listed companies that closely resemble ETFs. Like ETFs, they are controlled by a fund manager who invests the money in the trust.

Stocks and Shares ISA Returns – How Much Can I Expect to Make?

One of the most common questions investors ask is how much they can expect to make when investing in a stocks and shares ISA. The thing about investing is that it’s difficult to say for sure. If the stock market shoots up and you’re invested in the right place at the right time, you could double your money. Of course, there’s also a chance that the stock market crashes. If that happens, you could lose money.

In general, the best way to estimate your potential return is to look at how investments have performed in the past. The FTSE 100 has an average annual return of 7.4% over the last 10 years, while the S&P 500 in the US has an average annual return of 11.8%.

So, most investors can expect to make between 7-12% per year simply by investing in a fund that tracks the UK or US stock markets.If you are investing in ETFs, mutual funds, or investment trusts, look at how the fund has performed since inception and especially during periods when the stock market dropped.

How to Maximise Your Stocks and Shares ISA Savings Interest

One of the best things about ISA is that any money you don’t have invested still earns interest, just like in a savings account. This interest can add up over time, especially if you have a lot of cash sitting in your ISA. So, how can you maximise your stocks and shares ISA savings interest?

The best way is to shop around and compare the cash interest offerings at different ISA providers. While many ISA plans offer competitive fees, they can differ widely in what interest rates they provide for cash holdings. In addition, many brokers will offer introductory deals or promotions that you can take advantage of to get a better interest rate for your account.

Another thing you can do is to lock up money that you know you won’t need for a while. Many of the best performing stocks and shares ISA accounts have bonds or certificates of deposit that offer extra interest. The only catch is that you won’t be able to access your money until the maturation date of the bond without a penalty. If you’re concerned about needing the money, look for a bond or CD with a maturation date just one year into the future.


Comparison Table of the Best Stocks and Shares ISA in UK


 

Brand Minimum Initial Deposit Minimum Monthly Investment Minimum Lump Sum Stocks & Shares ISA Investment Invest in Permanent UK Resident
Hargreaves Lansdown £100 £25 £100 Over 3,000 funds Yes
Fineco Bank £100 £0 £100 Over 2,000 funds Yes
Halifax £0 £0 £100 Over 2,000 funds Yes
Interactive Investor £0 £9.99 £200 Over 1,500 funds No
AJ Bell £1.50 £25  £250 Over 2,000 funds Yes
Barclays £200  £4  £100 Over 2,000 funds Yes
Wealthify £1  £5  £150 Over 1,500 funds Yes
Santander £5,000 £20 £200 Over 3,000 funds Yes
Vanguard £100 £100 £500 Over 1,500 funds Yes
Fidelity £25 £0 £100 Over 2,000 funds Yes
HSBC £50 £0 £200 Over 2,000 funds Yes

How to Choose the Best Stocks and Shares ISA for you

So now that you have had some time to review some of the UK’s best performing stocks and shares ISAs, we now need to discuss some of the key metrics that you need to look out for prior to taking the plunge. After all, you need to ensure that your chosen platform is right for your individual needs – as no-two brokers are the same.

This should include:

Tradable Assets

Firstly, you need to check what assets the stocks and shares ISA will allow you to invest in. For example, while some platforms only support UK shares, others give you access to the best shares to buy from markets in the US, Europe, and more.

In other cases, you might have access to a plethora of ETFs, funds, and investment trusts. All in all, you need to ensure that the stocks and shares ISA allows you to invest in your preferred asset class.

Annual Fees

Most UK stocks and shares ISAs will charge you an annual fee. As frustrating as this can be, you need to remember that you have the potential to save thousands of pounds in capital gains and dividends tax.

The annual fee is typically expressed as a percentage, which is then multiplied by the amount you have invested. For example, if the platform charges 0.3%, and you utilized your full allowance, this would translate into an annual cost of just £60

Trading Fees

Every time you buy or sell shares through your stocks and shares ISA, you will need to pay a trading fee, so you’ll want to find the best stocks and shares ISAs for you with the lowest fees. Otherwise referred to as a share dealing charge, this is often a flat fee.

For example, if the broker charges £7.50 per trade, you will pay this when you buy shares, and again when you sell them. As a side tip, a flat fee is best suited for those of you that wish to invest larger amounts. If you want to start small, a low percentage fee is best.

Transfer Fees

Be very careful to assess where the broker stands with transfer fees. This is a fee charged when you decide to transfer your stocks and shares ISA to another provider. Not all brokers charge one, but you need to check nonetheless.

At the other end of the spectrum, some brokers will cover the transfer fee when you import your stocks and shares ISA from another provider.

Research and Educational Tools

If you’re planning to invest on a DIY basis, then you will need all of the help that you can get. At the forefront of this a stocks and shares ISA provider that offers heaps of research and educational tools, especially if you’re a beginner want to learn how to invest in stocks.

Regarding the latter, this should include some handy guides on how ISAs work, and what you need to do to build a healthy portfolio. In the research department, this should include fundamental news and market insights.

When Can You Invest in a Stocks and Shares ISA?

when can you invest in stocks and shares ISAsIn a nutshell, you can invest in the best stocks and shares ISA UK whenever you see fit. The most important thing to remember is that ISAs operate on a year-to-year basis. That is to say, the 2020/21 year operates from April 6th 2020 to April 5th 2021.

In other words, you can invest the entire £20,000 in one go, or instead inject small amounts throughout the year. If and when you reach your ISA limit, any additional investments will need to go in a standard brokerage account.

This simply means that you won’t benefit from any tax-savings on the surplus investments. Then, when the next tax year comes into play, you can start working towards your newly reset allowance.

What Are the Risks of Stocks and Shares ISAs?

The risks of investing in a stocks and shares ISA are much the same as any other investment opportunity. Put simply, there is every chance that you can lose money. After all, when you buy shares, there is no guarantee that the value of the stocks will go up. On the contrary, the shares could decrease in value. If this is the case – it is irrelevant whether you have the shares in an ISA, as you will not have any capital gains to shield from HMRC!

The fact of the matter is this – if you do not want to take on any risks whatsoever, then a stocks and shares ISA will not be for you. Instead, you will likely be suited for savings bonds that are backed by the FSCS. Sure, you won’t stand to lose any money (up to the first £85,000), you will be lucky to earn more than 1-2% per year. Ultimately, the investment arena is all about risks and returns, so do bear this in mind.

Are Stocks and Shares ISAs Covered by the Financial Services Compensation Scheme?

Most of the best performing stocks and shares ISA accounts are covered by the Financial Services Compensation Scheme (FSCS). This protects up to £85,000 of money and investments inside investing accounts in the event that your broker runs into financial trouble or goes out of business. This won’t stop you from suffering losses when the market drops, but it does eliminate some of the risk that comes with giving your money to a broker.

How to Build a High Performing Stocks and Shares ISA

Opening a stocks and shares ISA is the easy part. The most challenging part of the process is knowing how to pick stocks and shares for the ISA. With that in mind, below you will find some tips on building a high performing stocks and shares ISA.

Tip 1. Ensure Your Portfolio is Diversified

Without a doubt, the most important tip that we can bring to you is with respect to diversification. Put simply, diversification means that you will not be putting all of your eggs into one basket. An example of this would be investing your full £20,000 ISA allowance into a single company like Facebook.

Instead, a well-diversified portfolio would see your £20,000 allocated into dozens, if not hundreds of different shares. In fact, by investing £100 into each stock, you would have a portfolio of 200 companies! Take note, if you don’t go the ETF or index route, make sure that you know how much you are paying for each individual trade.

For example, if you use a stocks and shares ISA that charges £7.50 per trade, a portfolio of 200 stocks would cost you £1,500 in fees! If you were to pay a variable fee of, say 1%, this would cost just £200 when investing the full £20,000.

Tip 2. Create a Risk-Based Portfolio

A risk-based portfolio will consist of investments from a variety of risk levels. To keep things simple, this would be investments that are considered low, medium, and high risk. Sure, some of you might be looking to build the entire portfolio with low-risk assets, but in order to grow your money faster, it is also worth considering adding a small percentage of medium and high-risk assets. Of course, the amount of risk that you take is entirely down to what you feel comfortable with.

risk-based portfolio

The many different risk-based portfolios that you can opt for.

Nevertheless, a well-balanced portfolio might consist of:

  • 70% in high-grade stocks: This would consist of stable, strong, and highly established stocks like Amazon, Apple, GlaxoSmithKline, and IBM.
  • 20% in medium-grade stocks: These stocks will still form part of a major index like the FTSE 100 or NASDAQ, but they come with slightly higher levels of risk. An example of this is Uber – a multi-billion pound company that is yet to make a profit. While the firm has a global presence and could potentially be worth significantly more in the future, its ever-growing debt levels do come with added risks.
  • 10% in low-grade stocks: These are essentially high-risk, high-return stocks. They could, for example, be firms listed on the Alternative Investment Market (AIM), or a company that is currently experiencing financial difficulties. Either way, you should probably avoid adding more than 10% of your stock portfolio from this category.

Tip 3: Forget DIY Investing, Opt for a Fund

While you might enjoy the thrill of picking shares on a DIY basis, the overarching objective should be to grow your money over time. As a newbie investor, this can be a challenging task when you are required to pick shares yourself. As a result, why not consider a fund of some sort so that you can leave the decision-making process to the expects?

In a nutshell, ETFs, mutual funds, and investment trusts allow you to invest in a passive manner. Once you invest money into the fund, the fund manager will take care of the rest. Crucially, this means that the fund provider will be buying and selling investments on your behalf.

Best Junior Stocks and Shares ISAs

If you have a child, opening one of the best junior stocks and shares ISA accounts on their behalf is one of the most helpful long-term financial decisions you can make for them. That’s because you can invest up to £9,000 per year for your child and pay no capital gains taxes on profits inside the account. The money is safely locked away until they turn 18, when they can access it for whatever they need.

Looking for the best Junior Stocks and Share ISA? We recommend AJ Bell, which enables you to set up an account in just a few minutes and offers monthly recurring investments. You can invest as little as £25 per month, which can turn into a significant sum of money if you invest for a full 18 years. Plus, the ISA charges a commission of only £1.50 per month when you set up a monthly direct debit. AJ Bell offers access to over 2,000 ETFs, investment trusts, and mutual funds, so there’s no lack of options when it comes to setting up a long-term investment for your child.

Another good option is the Hargreaves Lansdown Junior Stocks and Shares ISA, which gives you access to over 3,000 funds. One of the big advantages to this account is that you can open an account with a minimum £100 investment. So, the barrier is lower than ever for setting up an investment account for your child.

Comprehensive List of UK Stocks and Shares ISAs

We’ve already had a look at the best performing stocks and shares ISAs, but there are many more out there. Here’s a comprehensive list of UK stocks and shares ISAs:

  • iWeb
  • Vanguard
  • Fidelity
  • Cavendish
  • Santander
  • Legal and General
  • Standard Life
  • Aegeon
  • Equiniti
  • Selftrade
  • Scottish Mortgage

How to Invest in Stocks and Shares on Fineco Bank

We think Fineco Bank is far and away the best stocks and shares ISA in the UK for 2021. Here’s how you can open a new ISA with Fineco Bank and start investing today:

Step 1: Open an Account

Click here to visit the Fineco Bank website and select the ‘Open Account’ option at the top of the page. You’ll just need to enter a few personal details to get started.

fineco bank open account

Step 2: Deposit Funds

As part of the account opening process, you’ll be asked to deposit funds. Fineco Bank requires a minimum deposit of £100 when you open a new stocks and shares ISA. You can pay with a variety of UK payment methods, including debit card, credit card, or UK bank transfer.

Step 3: Start Investing

Once your account is funded, you need to decide which shares or funds you want to invest in. You can browse Fineco Bank’s huge collection or simply enter the name of the company you want to invest in. Fineco Bank also offers a fund screener to help you find top-performing ETFs.

stock screener at Fineco

Your capital is at risk.

Fineco Bank – Open a Stocks and Shares ISA Today

While the viability of a cash ISA is debatable if you’re from the UK and you plan to invest in the financial markets, investing with the best stocks and shares ISA UK is a no-brainer. After all, you will be able to invest up to £20,000 in the current (and next) tax year, without having any of your capital gains or dividends liable for tax.

With that said, you still need to do lots of homework before taking the plunge. Not only should this include research on your chosen investments, but also on the respective stocks and shares ISA provider, too. Crucially, just because you are shielding your capital gains from tax, this isn’t to say that you are guaranteed to make money.

Ready to invest with one of the best performing stocks and shares ISA accounts? We recommend Fineco Bank, which offers account fees of just 0.25% and no commissions when you invest in ETFs. Simply click the link below to get started with Fineco Bank today!

fineco-bank-logo

Your capital is at risk.

Frequently Asked Questions about ISAs

How many stocks and shares ISAs can I have?

How does a stocks and shares ISA work?

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

Can you switch ISAs?

What can you invest in with a stocks and shares ISA?

Which stocks and shares ISA is best?

How to convert cash ISAs to stocks and shares?

What is a stocks and shares ISA?

How do I invest in an ISA stocks and shares?

How do I convert a cash ISA to a stocks and shares ISA?

How do I open a stocks and shares ISA?

About Kane Pepi PRO INVESTOR

Kane Pepi is a British researcher and writer that specializes in finance, financial crime, and blockchain technology. Now based in Malta, Kane writes for a number of platforms in the online domain. In particular, Kane is skilled at explaining complex financial subjects in a user-friendly manner. Academically, Kane holds a Bachelor’s Degree in Finance, a Master’s Degree in Financial Crime, and he is currently engaged in a Doctorate Degree researching the money laundering threats of the blockchain economy. Kane is also behind peer-reviewed publications - which includes an in-depth study into the relationship between money laundering and UK bookmakers. You will also find Kane’s material at websites such as MoneyCheck, the Motley Fool, InsideBitcoins, Blockonomi, Learnbonds, and the Malta Association of Compliance Officers.

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