Should you always use a Stocks and Shares ISA for investing in stocks and shares?

cin456

Hello, my first post :-) 

Background: 
We are looking at investing about 14 K (likely in a lump sum) into stocks and shares, probably into 3 different funds. Not going to get into individual share dealing and just want to diversify from our other savings to try and at least attempt better returns.

As complete beginners, we've been doing some reading and I've found that the advice seems to be to get a S&S Isa and choose a platform, then your funds/shares. All the charges are confusing and I just want a relatively cheap one. (been reading guides and posts on here re: platforms)
Spoke to my husband and he said that if you have a S&S Isa you get charged extra for the privilege of having one, so I should do it without. 
I've done so much searching that I just can't find the page again where I think I saw something about Isa's costing more.

My questions are:

Do they charge more for a S&S Isa as compared to doing it without?  
If so, roughly, on average, how much more?
If so, how is it charged (the platform?  for each purchase and sale?)

As I am a non tax payer (my earnings are very low) and we are unlikely to exceed 25K in these sorts of investments over the next 5 years (probably far less), is it worth doing it in a S&S Isa as a 'tax free wrapper'? Or should I go without? 

I was thinking that if there is no extra charges I might as well do the S&S Isa, but if there are charges I need to know if there would be any good reason to pay the extra given the amount and my tax status. 

Thanks for your time.
C

jimjames

Many providers charge exactly the same for an ISA as non ISA account. It might seem like it's not worth bothering with the ISA wrapper but the whole idea is that investments grow and over time tax might become an issue. You also don't know what the tax rules might be in future, what isn't an issue now might be a big tax bill later on.

So personally I would use the ISA wrapper where you can.. One like Vanguard charge 0.15% for their fees, HL charge 0.45%.

soulsaver

Y why it's complicated is the costs depend on nature of your holdings (funds vs shares), how frequently you trade and the value of your holdings.

So Hargreaves that above mentioned is good for small (in relative terms) amounts but relatively expensive when you get big.
eg £100000 S&S charged at 0.45 will cost £450 pa with Hargreaves (HL)..
But at Interactive Investor £20 pm max pa (after poss introductory offers).

Compare that with Iweb below which would work out cheaper than either, if you were to buy and hold.  But if you 'churned' at £5 a time... you could alter the dynamic.
If you 'held' and reached £100k iWebs platform annual charges are still nil
vs HL £450
vs Interactive £240 max.

If you decide you'll follow the mantra of buy and hold no matter what - I suggest iWeb would be least costly. But move quickly as iWeb was being swamped by applications a few months ago.

iWeb

How it works

• Once you've paid your one-off account opening charge of £100, you'll pay £5 commission for every trade you place.
• No dealing commission on any international trade (FX rates still apply).
• There are no costly platform charges or annual account fees so no matter how much your portfolio grows, you'll still pay the same price.

Albermarle

You may never see enough growth or have enough dividend income to have to pay tax . However it is still quite possible at some point that HMRC might ask to see your records if you are invested outside a S&S ISA. So if no other reason than to avoid hassle , then keep your investments in a S&S ISA. Most main investment platform providers do not charge extra either .

For £14K I would not worry too much about platform charges . You can always transfer in future anyway . The choice of investments within the S & S ISA and how they perform is more important . Make sure the S&S ISA provider you choose, has available the investments you want .

Finally ( as it is routine to ask this question on this forum ) , have you considered instead adding more to your pensions . Or starting one if you have not got one . Pensions benefit from tax relief, although you can not access them until your mid/late Fifties.

cin456

Thank you everyone, given me more to think about. Will most likely get a S&S Isa and be thinking about the providers and what they provide as well as charges now.. 
(Albermarle, we are in our mid-50's and my husband is maxing out his pension contributions, etc, thanks for the reminder.)

AndyTh_2

The main reasons to consider using a normal trading account are:

• You increase your investments more than £20k/year
• You hit the Personal Savings Allowance limit and so rather than S&S ISA, Cash ISA, and use your capital gains and dividend tax free allowance instead.

However you as a non-tax payer, you have an additional £5k nil rate starting savings interest tax band, so that last point is unlikely

hangryconsumer

jimjames said:

So personally I would use the ISA wrapper where you can.. One like Vanguard charge 0.15% for their fees, HL charge 0.45%.

I think there are also additional fund fees? It will be the 0.15% plus (I think) 0.4% if you were to choose one of the LifeStrategy funds.

masonic

hangryconsumer said:

jimjames said:

So personally I would use the ISA wrapper where you can.. One like Vanguard charge 0.15% for their fees, HL charge 0.45%.

I think there are also additional fund fees? It will be the 0.15% plus (I think) 0.4% if you were to choose one of the LifeStrategy funds.

Lifestrategy funds have an ongoing charge of 0.22% (not 0.4%), which is payable whether they are held in an ISA wrapper or not. There are no extra fees for holding a Vanguard fund in an ISA, either at Vanguard or Hargreaves Lansdown.

penners324

Wouldn't investing in these funds through a Pension fund (SIPP) be even better in terms of tax? You should still get the 25% tax back into the holding.