What is a stocks and shares ISA?
A stocks and shares ISA (individual savings account), sometimes known as an investment ISA, is a tax-efficient investment account. This means that you don’t have to pay Income Tax or Capital Gains Tax on any profits you make on your investment.
Unlike a cash ISA, you can invest your money in stocks, funds, bonds, and other assets. This gives your money more potential to grow over the long-term, but it also comes with some risk. The value of your investments can fall as well as rise and you may not get back what you put in.
Discover more about our stocks and shares ISA.
How does a stocks and shares ISA work?
Stocks and shares ISAs allow you to invest your money over the medium to long-term, with the aim of growing your money. This is different to a cash ISA as you are not guaranteed an interest rate, but there is more potential for growth if you are comfortable with the risk that you may not get your full investment back.
Each year you have an annual ISA allowance that is set by the Government, which is the limit that you can save or invest into ISAs each tax year. In the 2025/26 tax year the annual ISA allowance is £20,000.
Where can you choose to invest with a stocks and shares ISA?
You can choose to invest in ISAs with different investment styles, so you should check that you are choosing an ISA that suits your needs. Different ISA providers will give you different options, but the main ways you can invest are to either do your own research and invest in individual shares, or to invest into ready-made investment funds.
Investing in individual stocks and shares
If you choose to do your own research, then some providers allow you to buy and sell specific shares of your choice. When you do this, you’re essentially the owner of a portion of an individual company. However, you should be aware that there is an increased risk to choosing to invest in an individual or small number of companies, which is due to your investment’s performance being more reliant on a smaller number of companies performing well.
Investing in ready-made funds
Investing in ready-made funds is an easier way to invest your money in a wider range of companies, which are often chosen by investment managers. When you do this, your money is more likely to be spread across a range of companies in different sectors, as well as other types of investments such as property and bonds. This can help you to spread your risk but will not eliminate it completely. Depending on the provider, you may be able to choose to invest in specific funds or a ready-made fund portfolio.
At Shepherds Friendly, we believe in the power of simplicity so give members the choice of two ready-made funds. We offer one fund which invests in a broad range of companies, and another that specifically invests in companies that are leading the way in sustainability.
How to invest with Shepherds Friendly
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When you invest in a Shepherds Friendly Investment ISA, your money is placed into a ready-made With-Profits fund. Similar to other types of investment funds, a With-Profits fund spreads your investment across a range of assets, such as cash, equities, and bonds. Additionally, our expert Fund Managers actively manage the fund, adjusting the allocation between different types of assets to help reduce volatility and give you the best opportunity to grow your money over the medium-to-long term.
The key difference with investing in a With-Profits fund is a feature called ‘smoothing,’ which helps to reduce the impact of the stock market’s ups and downs. This approach provides a steadier and more predictable investment journey. So, during periods of strong performance, some returns are held back to ensure we can continue paying bonuses even when market conditions aren’t as favourable. Over time, this can result in more consistent growth compared to investments that experience direct market fluctuations.
We pay these returns on your investment through regular bonuses, which are added directly into your Investment ISA. The amount paid depends on how much you have contributed, how long you have been invested, and the overall performance of the With-Profits fund. Since the launch of our Investment ISA in 2008, the aim of providing steady and predictable returns has been achieved, as we’ve consistently paid bonuses to our members, which has helped them grow their money year after year.
Additionally, if you stay invested over the long term, you can benefit from compound growth. This means that bonuses paid into your plan are reinvested, allowing you to earn returns on the growth you’ve already achieved.
You can withdraw your money at any time, without any fees. However, during poor market conditions, we may apply a Market Value Reduction (MVR). This means that if you withdraw your money during these times, you might receive less than the current value of your plan. This measure helps protect members who remain invested and ensures everyone receives their fair share of the With-Profits fund. If you stay invested through strong market conditions, you could also receive a final bonus when you withdraw.
Opening an Investment ISA is simple. You can start with a Direct Debit from just £30 a month, or with a one-off deposit of £100. Once invested, you can easily manage your plan through our mobile app or online platform. Whether you want to top up your investment or adjust your monthly contributions, it’s all at your fingertips. And while we work hard behind the scenes to grow your money, we’ll keep you informed every step of the way with regular updates on how your investment is performing.
Note that, as with all investments, your capital is at risk, and returns are not guaranteed.
Investment ISA
Our Investment ISA is a great option for those seeking smooth and steady long-term growth. Your money is invested in a ready-made fund across a diverse range of assets aiming for steady growth over time. We add smoothing to the account with an aim to share our profits with you through annual bonuses that add to your potential returns.
How to invest in a stocks and shares ISA
Investing in a stocks and shares ISA can be quick and simple and it should take you about 10 minutes to complete an application. Before you open a stocks and shares ISA it’s important to ensure you are eligible. To invest in a stocks and shares ISA account you must:
- Be aged 18+
- Be a UK resident (excluding the Isle of Man and Channel Islands).
- Have access to your National Insurance number
- Have not already exceeded your annual ISA allowance of £20,000
Can you open more than one stocks and shares ISA?
You can open ISAs with more than one provider within the tax year, providing you don’t exceed the maximum annual allowance across all the ISAs you hold. The current maximum allowance for the 2025/26 tax year is £20,000. The ISAs you hold can all be the same type or you can choose a mixture that you’re eligible for in a given tax year.
It is important you check your eligibility for each type of ISA, and remember, you can only pay into one Lifetime ISA in a single tax year (up to £4,000).
The four types of ISA’s you can invest in are:
- Stocks and shares ISAs
- Lifetime ISAs
- Cash ISAs
- Innovative finance ISAs
You can also save or invest for your child’s future separately in a Junior ISA. The current Junior ISA allowance is £9,000 and the child will receive the lump sum when they turn 18.
Is a stocks and shares ISA worth it?
A stocks and shares ISA could be an ideal way to help fund your future and achieve your medium to long-term goals. There are many benefits, such as:
- You can shelter your investment growth from tax: You won’t pay tax on investment growth and can add up to £20,000 this tax year.
- There are different stocks and shares ISAs to suit different needs: You can choose to invest in a stocks and shares ISA that gives you more control over the specific shares you invest in. Or one that allows you to invest in ready-made funds which are managed on your behalf. You should research which type is best for your needs.
- You have the potential to earn more than a cash ISA: Investing gives you more potential for growth than a cash ISA. However, it should also be seen as a medium to long-term activity to help mitigate risk, as investments can go down as well as up.
Read through our Important Information Guides for the Shepherds Friendly Investment ISA. Remember that when you invest, your capital is at risk.
More information about stocks and shares ISAs
Important things to consider
- Past performance cannot be taken as a guarantee of future returns.
- Bonus rates vary from year to year depending on the performance of our investments and in some years we may not pay out any at all.
- HM Revenue and Customs may change the tax status of an ISA in the future.
- Inflation and making regular withdrawals may affect the purchasing value of your investment in the future.
- If you have been invested through periods of poor investment performance, and you leave the fund, you may get back less than the current value of your plan. This is known as a Market Value Reduction (MVR)
When you take out an investment product with us your capital is at risk and you may get back less than you have put in. All references to taxation are to UK taxation and are based on Shepherds Friendly Society’s understanding of current legislation and H M Revenue and Customs practice which may change in the future. Investment growth is by means of bonuses, the amount of which cannot be guaranteed throughout the term of the contract. Please ensure that you read the full terms and conditions of this plan which are available from your financial adviser or by contacting us directly.
Please note: No advice has been given by Shepherds Friendly, and if you are in any doubt as to whether an investment plan is suited to your needs, then you should contact a financial adviser. There may be a charge for financial advice, and the cost should be confirmed to you before any advice is given.