Best stocks and shares Isas: Compare the top providers

A stocks and shares Isa is a vital tool for building your wealth thanks to its tax-free perks but finding the right provider for you is essential.

There is a huge range on offer and the stocks and shares Isa that’s best for your circumstances depends on how you want to invest.

Investing comes with more decisions to make than saving cash, which usually involves simply picking an account with a best-buy savings rate. Do you want to pick shares, choose funds or ETFs, or have your investing platform do the work for you? The answer to this should heavily influence which platform you choose.

We run through the best investment platforms in this guide – from do-it-yourself platforms to providers that can manage your investments for you.

Below, we give our pick of the best stocks and shares Isas for different investors, helping you decide which is right for you.

Best stocks and shares Isa accounts

The first decision to make is whether you want to pick and manage investments yourself or have the provider do it for you. You then need to look at the services different stocks and shares Isa platforms provide and their costs.

Below you can find the best stocks and shares Isas to consider, separated into DIY investing and managed options.

It can be daunting to know where to start, so we spoke to Tom Francis, head of personal finance at Octopus Money, who gave his top tips about opening a stocks and shares Isa. He told us the key is to start small – but do something rather than nothing as a first step.

‘Know that you won’t see gains straight away and focus on the act of contributing, instead of the day-to-day performance. The magic of compound interest takes time, so set up a direct debit for an amount you can afford and forget about it.

‘Once you have started, you can then really tailor your savings, investments and pensions to your future goals to get the best possible results.’

> Our pick of the best self-invested personal pension (Sipp) providers 

Stocks and shares Isas for DIY investors

Here’s our selection of the top stocks and shares Isas for DIY investors. We believe certain investing platforms stand out for various features – we explain more below the table.

Our selection of the top DIY stocks and shares Isa providers to consider is below, along with what we believe each provider stands out for. These are in alphabetical order. Before going ahead, make sure you do your own research and think carefully about your needs and goals. Read more about how we test and review investment platforms.

> Learn more about AJ Bell Dodl*

> Learn more about Charles Stanley Direct*

> Learn more about Hargreaves Lansdown*

> Learn more about Interactive Investor*

> Learn more about InvestEngine*

> Learn more about Prosper*

> Learn more about Trading 212*

Managed stocks and shares Isas to consider 

If you’d rather make a few decisions before opening a stocks and shares Isa and then have the provider manage your investments, these are some of the best-known options. 

How to choose a stocks and shares Isa

‘Start by thinking about the level of control you would like over where you’re investing your money,’ says Tom Francis, head of personal finance at Octopus Money.

Answering the questions below can help:

• How much experience do you have with investing – and if you’re a beginner, do you want to learn as you go along, or delegate investing to someone else?
• How much risk are you willing to take when investing?
• Do you know what you’d like to invest in based on your attitude to risk – for example shares, investment funds, or investments that track certain markets?

If you have some ideas about the above, you could consider opening a DIY stocks and shares Isa.

On the other hand, if you’re inexperienced or don’t have much time to dedicate to managing your investments, you could start with a managed option. Just be aware that managed platform fees are usually more expensive than DIY options.

When it comes to fees, you’ll want to keep them as low as possible, but you should think about the level of service and support you’ll need when investing. For example, the cheapest stocks and shares Isas include InvestEngine, Prosper and Trading 212, but fee-free platforms won’t always offer the same level of investment research and customer service as more established players like Hargreaves Lansdown and Interactive Investor. 

Once you know which type of stocks and shares Isa you’d like, you should compare the platform fees as well as other key aspects of the account, such as the choice and flexibility available and the fees and limitations around transferring to another provider later on. 

Do you want to manage your own investments?

If you have some experience with investing already – or want to learn – you might be comfortable opening an account with a DIY investing platform.

These let you pick your investments yourself or choose a ready-made set of investments that the provider puts together.

Decisions about where to invest rest on your shoulders. Even when choosing a ready-made option, the provider won’t recommend what to choose or how to manage your money on an ongoing basis.

You’ll need to think carefully about how much time you can dedicate to managing your investments, and if you’re not experienced already, how motivated you are to learn.

There’s plenty to consider, including the ideal mix of investments based on the level of risk you want to take. For example, what will you allocate to more volatile investments such as equities, and what will you allocate to investments considered to be safer, such as bonds? 

Many of these services support you with educational content and detailed investment research designed to help you answer questions like the above, so they can still be suitable for more adventurous beginners who are happy to learn as they go along.

Do you want someone else to manage your investments?

Alternatively, some providers can manage your investments for you. You’ll usually have to tell the investment platform about your attitude to risk initially, and sometimes you can choose a particular investment style.

The key difference is these services pick investments based on your profile and then look after them on an ongoing basis. The platforms we’ve listed are ‘robo-advisors’ which means they use algorithms to pick and manage investments, although you usually still have access to human customer support.

For beginners, those with little investing experience, or people who just don’t want to dedicate time to investing, this can be a stress-free route. But these providers usually charge higher fees than do-it-yourself platforms. And you should still keep an eye on performance, comparing it against other platforms and how the markets have performed more generally.

Ready-made investments vs managed options

Even when investing in a ready-made portfolio, it’s best to see this as a form of DIY investing. The important difference between the services above is the level of personalisation and ongoing management of your investments.

Many DIY investing platforms offer ready-made investments. This is a set of investments built around a particular investment style and attitude to risk – for example ‘cautious’, ‘adventurous’ or ‘ethical and green’ portfolios.

But these ready-made investments aren’t specific to you. They’re often made up of existing funds that track certain markets or sectors and you still must choose a ready-made portfolio yourself.

With a managed option, the provider picks and looks after your investments based on information you give initially, tweaking them over time. Investments are more personalised to you and your goals, but management fees are more expensive than DIY options.

No matter whether you want to pick investments yourself or go for a managed option, you should check the fees for the underlying investments as well as the annual account fees.

These vary depending on the type of fund or investments. Keep this mantra in mind: high fees eat into investment growth, so it’s best to keep costs as low as possible. 

What is a stocks and shares Isa? 

A stocks and shares Isa – or Individual Savings Account to give it the full official term – is a tax-free account for your investments.

In the same way that the interest earned within a cash Isa isn’t subject to income tax, investments within a stocks and shares Isa can grow tax-free.

Investments held outside of a tax-free account are liable for taxes including capital gains tax, dividend tax and income tax.

The downside is you can only save up to £20,000 a year across all your Isa accounts, which is your annual Isa allowance.

You can split this any way you like, for example by stashing £5,000 in a cash Isa as part of an emergency fund and then investing up to £15,000 in a stocks and shares Isa.

Usually when you withdraw money from an Isa, you won’t be able to replace it in the same tax year without using up more of your Isa allowance. As an example, if you still have your full allowance left to use, but withdraw £2,000 and then pay it back in a week later, your allowance will reduce to £18,000 for that tax year.  

But there is a type of Isa called a flexible Isa, which does allow you to withdraw money and replace it in the same tax year without affecting your allowance. If you think you’d like this feature, check whether the Isa is flexible when comparing accounts. 

How does a stocks and shares Isa work?

Think of an Isa as a protective shield for the investments you own within the account.

If you buy a share in a company for £100 and then sell it for £125, you’ve made a decent profit – which is tax-free within your stocks and shares Isa.

Outside of your Isa account, you’d potentially have to pay capital gains tax on your profit.

Investing your money in stocks and shares comes with more risk than saving within a cash Isa.

The value of your investments can rise and fall in value, so it’s best to choose an investment Isa if you’re happy with keeping your money locked away for the longer term. Many experts suggest five years as a minimum.

This way you can smooth out the highs and lows of the market. For example, if you had to withdraw money when markets tumbled at the start of the coronavirus pandemic, you’d be solidifying any losses your money had suffered.

Are stocks and shares Isas worth it?

A stocks and shares Isa can be worth it if you’re happy to lock your money away over the long term and are comfortable with taking on some risk.

It’s a good idea to have emergency savings that you can access easily. Many experts recommend saving between three and six months’ worth of essential living expenses, which can keep you afloat if your income changes.

A stocks and shares Isa isn’t right for this purpose, because the value of investments rise and fall regularly and it can take time to sell them. If there’s a downturn in the markets when you need to withdraw money, you’ll end up cementing any losses.

Beyond your emergency fund, it’s a good idea to consider ways to make your money work harder for you. By taking more risks with your money, it’s possible to get a better return than the interest on cash savings – although it’s possible to get back less than you invested, too.

It’s important to think about your attitude to risk and how comfortable you are with riding out any dips in the value of your investments. If you think a sustained downturn in how much your investments are worth will cause you sleepless nights, it might be wiser to consider safer places to store your money first.

Many experts suggest investing for at least five years. This gives investments enough time to smooth out fluctuations in their value. When you eventually withdraw your money, it means there’s a better chance your investments would have grown on average.

> Here are the best easy-access cash savings rates 

Inflation eats into the value of cash over time

If you stashed cash under your bed and forgot about it for five years, it’ll be worth less than when you stored it away because prices of goods and services rise over time. This is known as inflation.

This means you won’t be able to buy as much with your money as you did when you hid it under your mattress.

The interest rate you receive in cash savings accounts helps to mitigate the effects of inflation. But you must keep track of which accounts pay more than the current inflation rate.

Interest offered in easy access accounts from the UK’s biggest banks often don’t beat it, meaning savings languishing in these accounts are losing money over time.

Another way you can potentially beat inflation is by investing. Over time, the growth of your investments stops inflation from eroding the value of your money.

Keep in mind there’s no risk-free way to invest in an attempt to beat inflation. But over the long term, returns on investments in a diversified portfolio of stocks and shares tend to outpace it, says Tom Francis, head of personal finance at Octopus Money.

‘It’s important to remember that you will typically be investing in the largest companies in the world, which create products we love and use daily, like Apple, Coca Cola and Netflix,’ he told us.

Be sure to keep an eye on the UK’s current inflation rate, as well as the top rates offered in cash savings accounts.

> Our pick of the best cash Isa savings rates