A Stocks and Shares ISA is one of the most powerful investing tools available exclusively to British investors. It grants the flexibility and freedom to buy and sell both UK and international stocks, helping individuals build potentially substantial nest eggs tax-free.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
And in a world where capital gains and dividend taxes are on the rise, this advantage is growing more crucial than ever!
So, let’s say an investor has just maxed out their annual £20,000 ISA limit. How much money could they make by this time next year, if they invest it in the stock market today?
Exploring growth potential
The amount of money an investor could make over the next 12 months ultimately depends on where the £20,000 is invested, of course.
According to the Economy Forecast Agency, the FTSE 100 is on track to climb by an impressive 20% by September 2026. That’s enough to turn £20,000 into £24,000. Meanwhile, analysts at Morgan Stanley think the S&P 500 could be on track to reach 7,200 points. That’s roughly 12% ahead of current levels, growing £20,000 into £22,400.
This certainly paints an exciting picture for index investors, especially those in the UK. Of course, it’s critical to remember that forecasts are never set in stone.
Projections are always based on numerous assumptions that aren’t guaranteed to come to pass, so investors may end up with less than expected once September 2026 comes knocking. Nevertheless, they’re still useful tools in judging the mood and expected direction of the stock market.
What about stock pickers?
For investors who prefer to have ultimate control, the next 12 months hold countless possibilities. But one stock that I’m excited for is Melrose Industries (LSE:MRO).
The enterprise plays a critical role in the civil and defence aerospace sectors, supplying essential components to industry titans like Boeing, Airbus, Lockheed Martin, and BAE Systems, among others. Yet due to a complex restructuring programme, its financials are quite confusing and ultimately hide the impressive profitability gains management has achieved.
But that’s starting to change. With the restructuring close to completion, the impact is beginning to materialise. Underlying margins across the first half of 2025 have expanded from 14.2% to 18%, with operating profits surging by 29%. And with guidance pointing to continued momentum, one analyst is forecasting the aerospace stock could reach 825p over the next 12 months – a 39% gain from current levels!
If Melrose does indeed reach 825p, then a £20,000 investment inside a Stocks and Shares ISA today could be worth close to £27,800, outpacing passive index investors. However, as with every investment, nothing is guaranteed. While promising, Melrose has some weak spots.
The group’s restructuring is part of a wider multi-year transformation programme that continues to pose execution risk. At the same time, the uncertain global trade environment is applying pressure on the group’s supply chain as well as currency exchange rates.
In other words, the company remains exposed to both internal and external disruptive factors that could leave investors disappointed. Nevertheless, given the growth opportunity, it’s a business that I think stock pickers may want to take a closer look at.
