5 Stocks and Shares ISA myths busted

Big word Myth referring to the ISA

Savings

MoneyPlus Features Team

30th January 2014 at 12:06pm

With April’s new tax year fast approaching, now is a good time to start looking at what tax efficient savings vehicles are out there to suit your short and long term goals.

Many are put off choosing a Stocks and Shares ISAs at this time due to preconceived myths and misconceptions.

With all the jargon around annual allowances, tax efficiency, income and capital gains tax, it’s easy to think that investing in a Stocks and Shares ISA is too much hassle.

But cut through the jargon and you’ll see that it isn’t as complicated as it may sound.

Many are put off choosing a Stocks and Shares ISAs at this time due to preconceived myths and misconceptions.

But cut through the jargon and you’ll see that it isn’t as complicated as it may sound.

Here’s 5 myths you might recognise:

Myth 1 – Stocks and Shares ISAs are only suitable for big savers and higher rate tax payers

You can usually open a Stocks and Shares ISA with around £500. Some providers may ask for more, so make sure you check the minimum deposit before you sign up. There are no rules around how often you contribute, providing you don’t go over the annual allowance, which is £11,520 for tax year 2013/14. With some providers you can save as little as £50 a month.

As Stocks and Shares ISAs are tax efficient when it comes to income tax and capital gains tax, they are attractive to higher rate taxpayers. Basic rate taxpayers can also enjoy some tax savings too.

Myth 2 – I can’t invest in a Stocks and Shares ISA because I need to understand all about funds

It’s true that with a Stocks and Shares ISA you can choose where your money is invested – shares, bonds, property funds and so on. But if you aren’t a confident investor don’t let that put you off. A number of providers offer ready-made fund packages including Standard Life’s MyFolio range where you choose to invest depending on how much risk you are willing to take.

Myth 3 – A Stocks and Shares ISA is risky

There’s saving options to suit all appetites towards risk. But, if you are planning to invest for the longer term, then you may need to accept a level of risk as your investment may go up or down in value. The answer here is to make sure the fund you choose matches the level of risk you’re willing to take. There are lower and higher risk choices.

ISAs are not just for big savers. They’re not just for 40% rate tax payers. You don’t need to be an investment expert.

Myth 4 – You need to tell the taxman about your Stocks and Shares ISA

No you don’t. With a Stocks and Shares ISA you pay no capital gains tax and no further tax on any income so you don’t need to declare it on a self-assessment tax form.

Myth 5 – Opening a Stocks and Shares ISA is complicated

It really isn’t, you mostly just need your name, address and National Insurance number and how much you want to invest. Make a decision on what funds you want to invest in and hey presto – easy.

ISAs are not just for big savers. They’re not just for 40% rate tax payers. You don’t need to be an investment expert and worry about selecting individual shares – you could choose to invest in funds which have been “edited” to make things simpler. Once you work through the myths, ISAs are simpler than you might have thought.

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The information in this blog is not financial advice. A Stocks and Shares ISA is an investment. Its value can go up or down and may be worth less than you paid in.

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