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Why You SHOULDN'T Use A Stocks & Shares ISA
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Why You SHOULDN'T Use A Stocks & Shares ISA

Do You Need a Stocks and Shares ISA Account in the UK?

In this video, Sasha discusses why you might not need a stocks and shares ISA account in the UK. She presents an alternative point of view that goes against the popular narrative.

Stocks and Shares ISA Accounts

  • A stocks and shares ISA account is an investing account available in the UK that lets you invest without paying any taxes.
  • Investments made within a stocks and shares ISA account are free from dividend tax and capital gains tax.
  • You're allowed to deposit up to £20,000 per year into your stocks and shares ISA which is more than 99% of people out there will ever be able to invest per year.

Why You Might Not Want to Use a Stocks and Shares ISA

  • A stocks and shares ISA takes more effort to set up and manage by the investing platform by the company it adds cost it adds a whole load of things that you don't really care but they do.
  • There are far fewer stocks and shares ISA accounts out there than regular investing platforms because of this, and the ones that do exist all charge some sort of fees.
  • The zero percent dividend income allowance in the UK is £2,000. That means you can earn £2,000 worth of dividends before you owe any tax on them whatsoever.
  • In the UK we have a zero percent tax band for capital gains which is set at £12,300 per year. Regardless of how much you earn an income elsewhere, you can get £12,300 per year in capital gains completely tax-free.

Stocks and Shares ISA Account Options

  • FreeTrade is the best overall option for a stocks and shares ISA account out there at the moment. The FreeTrade ISA costs £3 per month and then also charges you a 0.45% foreign exchange fee every time you make a trade in any foreign shares.
  • Vanguard only lets you invest in ETFs, so there are no stock options at all, and they charge you 0.15% per year as an annual management fee.

Conclusion

  • Sasha presents an alternative point of view that goes against the popular narrative that everyone needs a stocks and shares ISA account in the UK.
  • While a stocks and shares ISA account has its benefits, it may not always be the best choice due to added effort, cost, and fees.
  • The zero percent dividend income allowance and capital gains tax band in the UK mean that for most people, taxes will not be an issue when investing without a stocks and shares ISA account.

Investing in General Investment Accounts vs Stocks and Shares ISA

In this section, the speaker discusses the benefits of investing in general investment accounts versus stocks and shares ISAs.

Benefits of General Investment Accounts

  • You can invest for free by setting up a FreeTrade general investing account instead of doing it inside an ISA.
  • Stake is another platform that can be much cheaper than FreeTrade. It has a 0.5% foreign exchange fee compared to FreeTrade's 0.45%, but you only pay it once when you deposit money into the platform and then again only when you withdraw.
  • You can put money into Stake, pay that one-off FX fee, and then buy and sell companies for as long as you want whenever you want, however many times you want.

Capital Gains Tax Considerations

  • If your investments are growing so fast that capital gains tax becomes something that could be an issue, then consider opening a stocks and shares ISA at that point.
  • The truth is there isn't a huge difference in price between having an ISA or not. It is not hugely expensive to have this ISA, and for peace of mind, starting with the stocks and shares ISA might be easier.

Maximizing Tax-Free Allowance

  • You can sell your investment in chunks as long as the amount sold doesn't qualify for capital gains tax. This means selling one bit before the end of the financial year at the end of March or beginning of April, then selling another bit one or two days later in the other financial year.
  • By doing this, your tax-free allowance is essentially doubled because you're using two different allowances from two different years. You can also get two separate investing accounts with zero percent capital gains tax if you have a spouse and invest jointly.

Conclusion

  • If you're just starting out and investing, there is nothing stopping you from starting out with a general investing account that is free or very cheap.

Investing Apps in the UK Market

In this section, the speaker talks about investing apps that are entering the UK market and how they compare to The Moment app.

New Investing Apps Entering the UK Market

  • The Moment app costs £36 per year plus a 0.45 fee when buying and selling stocks.
  • Other new investing apps will offer more free or very cheap investing options but may not have an ISA account.
  • Different investing styles and circumstances can affect which option is best for each individual.
  • It's important to consider all options before making a decision.

Conclusion

In this section, the speaker concludes the video and thanks viewers for watching.

Thank You for Watching

  • If you found this video useful, please like it for the YouTube algorithm.
  • The speaker appreciates viewers' support and hopes to see them again soon.
Video description

*IMPORTANT UPDATE* The UK Government has slashed the 0% Capital Gains amount from £12,300 to £6,000 in 2023/2024 tax year and down to £3,000 the following year. This significantly affects the points discussed in this video, but for very low amounts invested initially, where even £3,000 is an exceptionally high gain relative to money put in, the video still explains a useful point. In this video I will explain why you shouldn't use a Stocks & Shares ISA. Stocks and Shares ISAs are a very popular way to invest in the UK because they mean you don't have to pay capital gains and dividend tax. And most people automatically assume that they HAVE to use a Stocks and Shares ISA to invest - otherwise the taxman will decimate your portfolio. But the UK also has very favourable 0% tax bands on capital gains and dividend tax which mean a Stocks & Shares ISA is not really going to be relevant for many people. And if you are investing smaller amounts, a General Investing account can be a better option. This is because Stocks & Shares ISAs are generally more expensive - whatever it is that you invest into - ETFs, US stocks, UK stocks, dividend stocks or anything else, there is usually a cheaper way to do it outside an ISA than through a Stocks and Shares ISA account. And especially if you are starting out, a free or cheap General Investing account can be a great way to try things out and learn the ropes without having to pay more. And you can always switch to using a Stocks and Shares account later if your investments grow - your annual ISA allowance is £20,000 which is plenty for most people. ☕️ JOIN MY PATREON - DISCORD, BONUS VIDEOS, TARGET PRICES, MODELS & MORE https://www.patreon.com/sashayanshin 💵 GREAT INVESTING APPS I USE GET A $10 BONUS WITH LIGHTYEAR (UK & Europe) https://lightyear.app.link/SashaYanshin You need to use promo code "Sasha" and the bonus is awarded after your first trade. INTERACTIVE BROKERS (Global - Main investing app I use) https://bit.ly/ibkr-sasha DISCLAIMER: Your capital is at risk. DISCLAIMER: Some of these links may be affiliate links. If you purchase a product or service using one of these links, I will receive a small commission from the seller. There will be no additional charge for you. DISCLAIMER: (For Lightyear affiliate link) The provider of investment services is Lightyear Financial Ltd for the UK and Lightyear Europe AS for the EU. Terms apply: golightyear.com/terms. Seek qualified advice if necessary. Capital at risk. DISCLAIMER: Trading 212 provides execution-only service. This video should not be construed as investment advice. Investments can fall and rise. DISCLAIMER: I am not a financial advisor and this is not a financial advice channel. All information is provided strictly for educational purposes. It does not take into account anybody's specific circumstances or situation. If you are making investment or other financial management decisions and require advice, please consult a suitably qualified licensed professional.