Self Select ISA Guide
A self-select ISA is a tax free vehicle in which you can place stock and shares which you choose yourself.
When you invest in an ISA, there is no tax relief at source, but any money invested rolls up largely tax free and there is no income or capital gains tax to pay on exit.
How much can I pay in?
For full stocks and shares ISA, you can invest a maximum of £7,200 in the 2008-09 tax year.
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- Shares listed on recognised international exchanges, excluding AIM and OFEX;
- Most unit trusts, Oeics, Exchange Traded Funds (ETFs), investment trusts and UCITS (collective investment funds which can be sold across national borders within the EU);
- Private sector corporate and European Economic Area (EEA) government bonds with at least 5 years to maturity; and
- Cash (balances should only be held for future investment, not permanently).
Many stockbrokers and investment management houses offer Self Select ISAs and provide varying levels of advice...
Discretionary portfolio management: your stockbroker makes the investment decisions for you.
Advisory portfolio management: your stockbroker makes recommendations but seeks your approval before implementing any investment decisions.
Execution-only: you invest without any advice.
Many investors like to make their own decisions and just want a low cost ISA which allows them to buy and sell shares online.
All online self-select ISAs are referred to as ‘execution-only’, in that you make your own investment decisions and the stockbroker carries out your instructions, but gives no advice.
- Certain self-select ISA accounts only offer investment in UK shares, settled via CREST;
- Check whether you can invest in corporate bonds, gilts and unit trusts/Oeics, as well as shares. A growing number of stockbrokers allow investment in Exchange Traded Funds (ETFs), which are shares which mirror certain indices and can sometimes be cheaper than investing in index tracker funds.
- One of the great attractions of ISAs is the facility to hold foreign shares, but not many stockbrokers offer this service.
Shares you already own can only be transferred directly into a self-select ISA providing they come from:
- a profit-sharing scheme;
- a Save As You Earn (SAYE) approved s share option scheme;
In both cases, you must transfer the shares into the ISA within 90 days from the date of receipt of the shares or of exercising the share option. The transfer is free of capital gains tax.
The transfer-in of such shares will count as part of your annual ISA allowance. It is not possible to transfer other shares directly into an ISA, unless you sell them first, and reinvest, which will incur buying and selling charges.
Dealing commission on shares is charged as a flat fee per deal, or on a tiered percentage rate based on the value of the transaction. All share dealing is subject to stamp duty at 0.5 per cent.
Investment funds, such as unit trusts and Oeics, carry initial and annual management charges, although you may be able to negotiate discounts if you deal through a discount broker or fund supermarket.
Annual management charges
All online self-select accounts charge fees to cover administration costs for account opening, processing dividends, corporate actions and managing nominee accounts.
Administration fees are levied in one of two ways:
- as a flat fee , either charged monthly, quarterly or annually; or
- as a percentage of the portfolio’s value.
Last edited 22 January 2009