So, you’ve heard about the tax benefits of an ISA and are thinking of opening one. But you don’t know who exactly is eligible or even what you need to do to open one. We’ve got the answers to your questions.
What is an ISA?
‘ISA’ stands for Individual Savings Account. It’s a tax-free account in which gains and income are not taxed. Basically, an ISA allows you to invest a limited amount of money (up to £20,000 each tax year) in assets without having to pay tax on the profits you make.
Bear in mind, though, that tax rules can change in the future and their effects on you will depend on your individual circumstances.
There are five main types of ISAs:
Who can open an ISA?
To be eligible to subscribe to an ISA, an investor must be:
- 16 or over for a cash ISA
- 18 or over for a stocks and shares or innovative finance ISA
- 18 or over but under 40 for a Lifetime ISA
Additionally, you must be one of the following:
- A UK resident (the Channel Islands and the Isle of Man don’t count)
- A Crown employee (for example, working for a diplomatic or overseas civil service) or their spouse or civil partner if you do not live in the UK
If you have an ISA and then become a non-resident, you may retain the existing ISA but you cannot take out a new one.
Where can I open an ISA?
You can open an ISA at a wide range of institutions including:
- Banks
- Building societies
- Credit unions
- Stockbrokers
- Friendly societies
- Peer to peer lending services
- Crowdfunding companies
What do I need to open an ISA?
If you are thinking of opening an ISA, your chosen provider will provide you with detailed information on what documentation you need to open an ISA with them. At the very least, you’re likely to need:
- Proof of identity (a full UK passport or a UK photocard driving licence)
- Proof of address
- Your National Insurance number
Good for long-term, cost-conscious investors who want lots of flexibility
Interactive Investor Stocks and Shares ISA *
| Trading Commission | From £3.99 |
| Account Management Fee | From £4.99 (Depending on Subscription Plan) |
- Pros & Cons
- Fees & Charges
Pros
- Fixed monthly subscription fees.
- Free monthly trades included depending on plan.
- No fees on regular investing schemes.
- Wide investment range across global markets.
- Curated investment tools (Quick-Start Funds, Super 60 shortlist).
- Regular investing tools to automate wealth-building.
- Solid educational resources and expert insights.
- User-friendly platform for managing portfolios.
- Access IPOs and bond launches.
- Hold and earn interest on foreign currencies.
Cons
- Monthly fees can feel steep for small portfolios.
- No fractional share trading.
- Free trade credits expire every 31 days.
- Large trades (greater than £25,000) can incur additional costs.
- No AI-driven tools or robo-advice features.
- Alerts and watchlist capabilities are pretty basic.
Subscription Plans
- Investor Essentials (£4.99 per month) – This is the entry-level subscription for investors with less than £50,000. It allows for free regular investing where a small sum of capital is drip-fed into a selection of eligible investments at no cost. You can also include a Stocks and Shares ISA under this plan.
- Investor (£11.99 per month) – In addition to the features of the Investor Essentials plan, the Investor plan removes the £50,000 limit, allows the addition of Junior ISAs, provides a free membership to two family or friend members, and grants one free trade per month.
- Super Investor (£19.99 per month) – In addition to the features of the Investor plan, the Super Investor plan grants up to four free trades per month, as well as up to five free memberships to family and friends. It also provides discounts on international trading fees.
Additional Fees
- Share dealing (online) – The standard trading fee for UK shares and funds, and US stocks is £3.99 across all subscription plans. For any other international investment, the trading fee is £9.99, or £5.99 when using the Super Investor plan.
- Share dealing (phone) – II charges a flat £49 for trades executed over the phone. Note that free trade credits from subscriptions cannot be used for phone trades. Furthermore, buying or selling shares listed on exchanges in Sweden or Switzerland can only be executed over the phone.
- Large transaction fees – When buying or selling UK shares with a trade value exceeding £100,000, there is an additional £40 fee. When buying or selling US shares with a trade value exceeding £100,000, there is a 0.04% fee. When buying or selling other international shares with a trade value exceeding £25,000, there is a 0.1% fee.
- Dividend Reinvestment – £0.99 per automatic reinvestment.
- Foreign exchange – When trading internationally, Interactive Investor will charge a foreign currency exchange fee unless you have sufficient funds of the required currency already in your account. The fee depends on the transaction size.
- £0 to £24,999 – 1.5%
- £25,000 to £49,999 – 1.25%
- £50,000 to £99,999 – 1.0%
- £100,000 to £599,999 – 0.5%
- £600,000 or more – 0.25%
- International investor fee – If you are no longer a UK resident, Interactive Investor will still allow you to keep an existing account. However, there is an additional £4 a month subscription fee required. However, as a non-UK tax resident, you cannot continue to contribute to a Stocks and Shares ISA.
- Deposit fee – None.
- Withdrawal fee – No fees for next-day withdrawals. A £15 fee for same-day withdrawals, which must be requested before 2pm.
Can I open more than one ISA?
Yes. There’s no limit on the number of ISAs you can have overall. That said, you can only pay into one of each type of ISA in each tax year. The total amount you put in – across all ISAs – must not exceed your annual ISA allowance of £20,000.
Can I open an ISA with someone else?
No. ISAs can only be taken out by an individual. However, you can pay into someone else’s ISA (or someone can pay into yours) as a gift.
You can also open a Junior ISA for children under 18.
Can I transfer my ISA to another provider?
Yes. If you have already opened and paid into a cash ISA, for example, and see a better rate on the market, you can transfer your ISA savings to the new provider.
However, don’t simply withdraw your money or close your account entirely as then you’ll lose its tax-free status. Instead, ask your provider to arrange the transfer.
To learn more about ISAs, take a look at our top-rated stocks and shares ISAs in the UK and find a good fit for your financial needs.
The content in this article is provided for information purposes only. It is not intended to be, nor 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.