Is a stock ISA simply the account one uses to invest in investment platforms?

Question

No matter what I read/watch, it isn't quite clear to me if a stocks/shares ISA is one of the following two:

• an account where I can put some money into, and then invest that same money (by linking it to a trading platform). Consequently, whatever money I get from that account as revenue (up to £20000) is not taxed.

• or is it, in itself, an investment "platform" of sorts, where I put some money in and await for an annual revenue from the bank, a bit like the help to buy ISA? (and then no taxes are paid on said revenue?)

I am not sure my question makes sense as I am only just starting to look into investments.

Answer 1

An investment platform will provide a web site and/or mobile app that let's you trade in financial securities¹.

Many will offer three different types of account:

• an ordinary account² (sometimes called a trading account or general account)
• an ISA³
• a Self Invested Pension Plan

Most of the time each of these accounts will look exactly the same on the web site/app⁴. It is only the tax treatment that is different.

Examples of providers that support ordinary, ISA and SIPP accounts are

• AJ Bell
• Barclays Smart Investor
• Interactive Investor

There are many others out there.

Each of these providers has one investment platform with three account types (ordinary, ISA, SIPP) available. Buying and selling financial securities looks exactly the same in all three account-types.

ISAs and pensions are often described as providing a tax-protection wrapper⁵ around an account. What you have inside the wrapper (e.g. shares you have bought, cash you have earned) looks the same as an account that has no wrapper. But those with tax-protection wrappers are not liable for Income Tax or Capital Gains Tax [Note that withdrawals from a flexi-drawdown pension do have tax implications].

---

¹Financial securities can be shares, ETFs, Investment Trusts, Unit Trusts, OEICs, Bonds, etc. Some platforms will limit which are available to buy/sell. Some may be very limited.

²Which is subject to Income Tax and Capital Gains Tax.

³This refers to Stocks & Shares ISAs, not Cash ISAs.

⁴The differences will be things like limits on subscribing money to ISAs (currently limited to £20,000 per year across all ISAs), limits on SIPP subscriptions (currently limited to lower of £40,000 per year and annual salary - and this limit is for the gross contribution including tax breaks). Another difference would be extraction of pension income from a SIPP which normally uses the PAYE system.

⁵Usually called a tax wrapper or just a wrapper.

Answer 2

It is closer to the latter - you open a Stocks and Shares ISA account, put some money in, and with most providers you can choose either to invest that money in specific shares or in a managed portfolio.

Those investments are only accessible through whatever platform the Stocks and Shares ISA account uses, not linked to a separate trading account.

The value of the account goes up and down as the value of the shares you have invested in changes, and you can sell the shares and remove the money from the ISA at any time (although you can't keep withdrawing and replacing the money in the account as there is an annual limit on how much you can invest). Dividends from the shares can be set up either to be paid directly back into the account or out into a separate cash account.