Why You SHOULDN'T Use A Stocks & Shares ISA

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*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.

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*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.

SashaYanshin
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If you were lucky enough to have bought Greatland Gold shares in 2015 for 1/10th of a pence, and bought 5 million shares for £5, 000 and stuck them in your S&S ISA, five years later that £5000 would have turned into around £1.75 million. It doesn't happen very often, but it is rare examples like this when you definitely want a stocks and shares ISA.

markusass
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I disagree. Even if someone isnt putting the maximum into an ISA it’s still worth it, as over the years it will grow and compound. As an example, I’m approaching 100K in my ISA, not through deposits but through growth and if a friend of mine started today, it would take them 5 years in deposits to catch up. Later down the line in 20 years, I will have a huge investment portfolio that makes me a lot of money, whether that’s through dividends or capital growth and it will all be tax free. Don’t just think about the now but think about what the ISA could be in later life. No point investing through a general account and then later down the line having to liquidate it and only be able to put in 20K a year.

itsmesaltax
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Thanks for this. I’m very late to the game and this is SO relevant to where I am now. Difficult to find info on YouTube that is free from BS and unbiased - great channel. 👍

chambourcie
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It makes sense to use both an ISA and GIA (if you are lucky enough to afford it) to take advantage of the tax free allowances. This has only recently dawned on me as a way to have more time in the market and then "bed and ISA" those investments or crystallise the gains in a tax efficient manner. Chris Bournes YT channel covers this very well. I think your title perhaps should have been entitled "Don't forget your GIA" (or along those lines). However you're correct in bringing this investing strategy to our attention. Your take on it is good food for thought.

gordonjames
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Excellent work (as always!) Sasha. You are one of the very strongest role models for thinking differently and deliberately challenging your own habits and assumptions. I’ve said it before, but you really deserve a much larger YouTube audience.

Like you, I also use my ISA a lot; but I also invest in non-ISA stocks in a GIA, and buy cryptocurrency through eToro.

ScottishJazzman
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My approach is to use both but I prioritise the ISA and once that is filled, move onto the general investment accounts. As an investor my plan is to leave the investments alone for 10 yrs at least and so having tax protection is important. These generous ISA allowances started recently and may change.

repudiummoney
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Found your videos yesterday. Thanks for the advice really helps understand this stuff.

domhowling
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You are absolutely right. Brilliant video!!

cashrewardsnetwork
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This is such a fresh perspective! I’m new to investing as we’re saving for non-military life and your channel has been so helpful. I opened a vanguard isa a few months ago but I might to this as well - I’ll use your links if I do 😊 I’m actually a blogger and randomly stumbled upon your keywords video the other day, such a good breakdown of things I hadn’t considered, thank you!

thesesweetpages
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I just started investing through FreeTrade GIA and was confused If I had to switch to ISA. You have exactly answered the doubts and clarifications I was looking for. thank you. very informative.

Simply_Trains
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What about Trading 212 that has a stocks and shares ISA that has no monthly fee and exchange rate fee for US stocks is far less than Freetrade?

itsmecal
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Interesting video!

I have an investment ISA then a couple of general investment accounts as it doesn’t make sense to buy individual shares in my ISA (fees and availability issues). I focus on investing in funds, trusts and ETF’s in my ISA then just have relatively small small amounts in general investment accounts 😊

Pleased to see the ISA allowance wasn’t changed in this budget. 👍

creatingbalancefinance
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Investing can be a very impactful way to grow your money, especially when you consider the three main factors that play a role in how much wealth you build: rate of return, how much you invest each month and, of course, time.Big ups to everyone working effortlessly trying to earn a living while building wealth. I’m 50 and my wife 44 we are both retired with over $3 million in net worth and no debts. Currently living smart and frugal with our money. Saving and investing lifestyle made it possible for us this early even till now we earn monthly through passive income...

wonderloot
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Interesting perspective and mostly agree with this with one exception. Even if dividends below £3k the income still counts for ‘taxable income’ (at 0%) which is relevant for the calculation for Child Benefit so is relevant in this case

lucaspja
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Thanks Sasha. Both my wife & I work in tech and have stock options that vest every so often. I'm thinking of liquidating shares up to the tax-free threshold then transfer the cash into ISA Freetrade and purchase the same stock during the trading window. Btw, I've been following you for some months now and you've encouraged me to start investing. Based on much of your advice, I've made significantly more than the £36 annual Freetrade ISA amount, so I'm currently in the black :) thanks for all your hard work!

bitsa
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Thanks, Sasha! As always provoking title, but enjoying watch. Thanks for useful info and food for thought!

Eevvgeny
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Definitely a useful video. As you make a point of caveating that it is just a devil’s advocate idea to consider, there’s nothing to argue for or against. It adds an interesting option to consider in the event someone does manage to maximise their ISA contributions in one year, they can still top up in a general trading account, if they come into funds they want to deploy immediately, and use it as overflow outside of their ISA.

MarkWarmington
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This was good, thank you Sasha but it has actually made me realise that I dont have a profit realisation strategy. Is it better to sell after a run of success, extract the profit and then re-buy in? Or is it better to just stick in for as long as possible? Is it different for different classes, so with an ETF do you just stick in but for stocks you should have a target sell price? A video on this would be REALY useful please.

NickWard
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makes sense when you are starting out on the investment side.
And it is definitely worth, over time, to also get an S&S ISA I think.
Do you think that an S&S LISA is still worth it up to the £4k pa limit before looking at your other options?
EDIT: Just for clarification, I am referring to retirement. Not planning on touching the money (that I am talking about here) till then

TiaanKruger