We use cookies to optimise our site and allow us and 3rd parties to tailor ads you see on sites. By using this site you agree to our cookie policy

LearnBonds UK

Investment ISAs | Best Investment ISAs for 2020

Looking for tax free options on where to save you money? Try opening investment ISAs now to earn tax-free interest and income!
Avatar
Author: Nica
Last Updated: April 16, 2020
ISA Calculator
ISA Calculator

The traditional savings account was once the go-to choice for UK savers, but today a savvy saver will start their savings portfolio by maximising their tax-free allowance with an Individual Savings Account also known as an ISA. In the UK from the 6th April 2020 – 5th April 2021 the tax-free allowance is £20,000.

In each subsequent year of saving you can keep adding to your ISA pot and see the benefits of compound interest, meaning that as you add money in the following year, you will earn interest on the previous year’s allowance, the current year’s savings and on last year’s interest.

While putting your money into an ISA is an easy choice, picking the right investment ISA for your circumstances is not so straight forward. There is a wide variety to choose from, some with fixed terms and others that are more flexible. In this article, we provide you with an outline of all investment ISA types and a selection of some of the most reputable providers around.

Table of Contents

    MoneyFarm

    Our Rating

    MoneyFarm - ISA rates
    • Transfer out your savings when you need to
    • Invest in highly diversified portfolios
    • A personal adviser to help you get started with your investment
    • Expert portfolio management
    MoneyFarm - ISA rates

    What are ISAs in the UK?

    An ISA is a type of saving vehicle that enables you to save and invest without getting taxed on any interest and income you make. In the current tax year, the total amount you can save in an ISAs is £20,000, which also known as ISA allowance.

    There are five main types of ISAs that you can pick depending on the investment type you want to be involved with. These include cash ISAs, help to buy ISAs, stocks and shares ISAs, lifetime ISAs, and innovative finance ISAs. Note that each type is charged differently.

    Top 3 Investment ISAs Providers in the UK

    1. Moneyfarm - Best for In-House Risk Assessment

    Moneyfarm is a web and app-based investing platform. It aims to make investing in ISAs easy, cheap and accessible for all. It offers three main products which include stocks and shares ISA, pension and general investment account. These options will enable you to make the most out of your money.

    No matter the investment product you choose, Moneyfarm features an in-house risk assessment. It is a questionnaire that is intended to match you to a risk portfolio that mirrors your investment knowledge, intended timeline and financial understanding.

    Moneyfarm is a perfect option if you don’t have the experience to manage investments. It is an affordable option that does not require a lot of effort. Also, since it lacks exit fees, you can withdraw your money at any time.

    On the downside, Moneyfarm requires a high minimum investment amount. Initially, you could invest with as little as £1. However, it raised the minimum limit to £500 in 2018 to compete with other providers such as Nutmeg. In February 2020, Moneyfarm changed the threshold to £5,000.

    When investing with Moneyfarm's stocks and shares investment ISA, depending on your attitude to risk, the expected rate of return on the lowest risk portfolio is claimed to have tracked at 8.4% return on investment per year over the last four years performance. At the highest risk end of the spectrum, they advertise returns of 55%.

    Our Rating

    • Manages your investment portfolio
    • No exit fees
    • Free withdrawal
    • Offers only one type of ISA

    2. Nutmeg - No Unnecessary Costs

    Nutmeg is one of the leading investment firms in the UK. It was established in 2011 with the aim of stripping the unnecessary costs associated with investing. As a result, it makes investing accessible to a wide variety of people. The firm appeals to people with a small amount of money to invest and with little experience in investing.

    Since its establishment, the company has grown leaps to become a reputable investment firm. It has also won several awards such as the best online stocks and shares ISA provider award, Your Money award, etc.

    Nutmeg is a discretionary investment management firm, which means it makes all the investment decisions on your behalf. All you need to do is open an account and fill a questionnaire about your investment goals, risk tolerance, etc. This will enable the company to create a balanced portfolio that matches your needs.

    Currently, the firm offers 5 main investment products which include stocks and shares ISA, pension, lifetime ISA, general investment account and junior ISA. It also has a fully managed portfolio, social-responsible portfolio and a fixed allocation portfolio.

    It doesn’t charge account setup fees and exit fees as well as trading fees and withdrawals fees. In terms of return on investment, in the last 5 years, their lowest risk portfolio has averaged a return on investment of 0.4%, while the highest risk category has returned on average 8.4%.

    • Simple and easy to understand platform
    • No setup and exit fees
    • Offers an intuitive app
    • Few DIY options

    3. Hargreaves Lansdown - Best for Investment Options

    Hargreaves Lansdown (HL) is one of the leading fund platforms in the UK. It has over 1.1 million clients and manages over £91 billion. The reason why HL is popular is because of the wide variety of investment options it offers as well as tailor-made portfolios.

    Some of the ISAs offered by HL include stocks and shares ISA, junior ISA and lifetime ISA (LISA). In addition, the firm also offers other services such as SIPP, funds, trusts, research and advanced investment tools.

    Depending on the type of account you want to open, the minimum deposit can range from £1 and £1,000. Since the firm is regulated by the Financial Conduct Authority (FCA), funds are deposited in tier-1 banks. This means that your money is protected from being included in any asset liquidation in case the firm goes bankrupt.

    HL does not advertise their track record on their website but they do offer three risk-based options for their investment ISAs based upon your desired rate of return. You can invest in a 2% low-risk ISA, a 5% medium risk ISA or an 8% high-risk investment ISA.

    • Quality education tools
    • Wide range of investment options
    • Offers several ISAs
    • High exit fees

    How to Invest in ISAs in the UK

    Investment ISAs are specifically referred to as stocks and shares ISAs. They are a great tax-efficient haven for your investment because of the tax-free ISA allowance. The income you earn from this investment is also not taxed.

    Putting your money in an investment ISA will give you more income than in cash ISA. However, it is worth noting that you can also lose money on your investment due to the unpredictability of the stock market.

    How to Choose an Investment ISAs

    Cost

    Due to increased competition, the costs associated with investment ISAs have become lower. Now, it’s likely that you’ll pay between 0.25% to 0.4% annually for the administration of your funds. It is important to note that you can also incur an extra cost for any funds you buy. In most cases, it is about 0.75%, which is for the management of the investment. Also, make sure the provider does not charge unreasonable exit fees in case you wish to move to another provider.

    Remember to choose an ISA provider that can offer you high-quality services at an affordable rate.

    Features

    Each ISA provider has different features. Choose an ISA provider with a reputation for offering top-notch online and mobile services. This will enable you to access and monitor your investment on the go.

    If you are a new investor, you should look for providers with simplified online experiences and then progress to more establish providers.

    Customer service

    Choose an ISA provider with reliable customer support that can you can easily contact via live chat, email, phone, etc.

    How To Earn More From Investment ISAs

    Have an Investment Plan

    Before you start investing, it is very important to have a plan. Take time to think about the options available, your aims and objectives with your investments as well as how long you plan to invest. You can fine-tune it and add strategies on how to handle and mitigate risks. It is important to review the plan frequently or every time you want to make investment changes.

    Diversify your Investment

    Most first-time investors are attracted to individual shares because of the stories they have heard about people making big profits. However, since the stock market is highly volatile, this can be a risky endeavor. Rather, you should consult expert fund managers because they have significant experience and can provide diversified investment options.

    See How Much your Savings could be Worth using our ISA Savings Calculator

    Your Initial Deposit

    Enter "0" for initial savings if there is no initial deposit.

    Initial Savings:
    Lenght of Investment:
    Begin Investment:
    Annual Interest Rate (APR %):

    Deposits/Withdrawals

    Select "never" on frequency if no recurring transactions are made.

    Transaction Frequency:
    Deposit Each Cycle:
    Withdrawal Each Cycle:

    Income Taxes & Inflation

    Enter "0" in fields if you do not wish to adjust results.

    Annual Inflation (%):

    Here Are Your Results

    Total Amount Deposited:
    Total Amount Withdrawn:
    Interest Earned:
    Spending Power of Your Savings:
    Annual Percentage Yield (APY %):

    Conclusion

    Introduced in the 1990s, individual saving accounts (ISAs) are an incentive from the UK government to encourage people to save. ISAs are special because they enable people to save and invest without getting taxed. However, the amount you can put in an ISA is limited to £20,000.

    Make sure to choose an ISA provider with a good track record to maximize the benefits that you can get from your investment ISA accounts.

    MoneyFarm

    Our Rating

    MoneyFarm - ISA rates
    • Transfer out your savings when you need to
    • Invest in highly diversified portfolios
    • A personal adviser to help you get started with your investment
    • Expert portfolio management
    MoneyFarm - ISA rates

    FAQs

    Is it possible to have more than one ISA?

    Yes, you can hold all the types of ISA in the same tax year, but you cannot have more than one type of ISA in the same year. For instance, if you already have funded a cash ISA in this tax year, you cannot have another account until the next tax year.

    How much can I put into an ISA?

    Due to the numerous tax advantages of ISAs, the government limits the amount each account holder can contribute in each tax year. In the UK, the tax year starts from April 6 to April 5 of the next year. You can only put £20,000 per tax year.

    Can I withdraw funds from ISAs whenever I want?

    This mainly depends on the type of ISA you have and the terms and conditions of your provider. For instance, with most cash easy access ISAs, you can withdraw your money whenever you want.

    Can I inherit an ISA?

    Nowadays, it is possible to inherit the ISA savings of your spouse or civil partner when they die and continue reaping the tax-free benefits. This is done by adding a one-off ISA allowance, which is equal to the deceased holdings. The additional permitted subscription will enable you to re-shelter the assets in your name without affecting your own ISA allowance of the same tax year.

    Is an ISA a safe way to hold my money?

    As long as the ISA provider is regulated by reputable financial authorities like the FCA, your funds are protected.

    See our full range of ISA resources

    ABCDEFGHIJKLMNOPQRSTUVWXYZ#
    Avatar

    Nica is a BA Political Science degree holder who fell in love with writing after college. She specializes in financial technology and cryptocurrency. At her young age, she was already able to work with founders who graduated from Harvard, tech startups funded by Y-Combinator, CEOs of multi-million dollar blockchain companies, investment companies in London and many more.