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4 Types of Stock & Shares Investment Accounts

Dan Morristar
Dan Morristar
4 min read

When opening a Stocks and Shares investment amount there are 3 main things to think about:

  • What type of account do you want to open
  • What do you want to invest into
  • What provider do you want to select

This page is going to focus on what type of account you may want to open and link a few YouTube videos I have made recently on this topic.

(1) Trading Accounts

A trading account gives access to financial markets via spread betting, CFD trading and investing. Platforms like IG will allow you to open a trading account and give access to charting tools. Platforms like these are best suited for short term investors and they typically allow users to trade with leverage. Which in my opinion is a huge negative as this adds the possibility of magnified losses. I personally avoid platforms that offer CFD and Spread Betting options.

In the UK Spread betting and CFD accounts are the main type of Options Trading that brokers provide. It's very hard to find a platform in the UK that allows traditional Options Trading. The only account I have found that allows UK signups and to trade traditional options is TastyWorks.

These type of accounts typically attract new investors and the WallStreetBets crowd. They supply a service tailored towards a trader rather than an investor and 95% of all traders loose money. For this reason, I avoid these types of accounts in favour of longer term investment strategies.

(2) Stock & Shares Account

A stocks and shares account is an account that is better suited for longer term investment strategies. These accounts can typically hold Shares, funds, investment trusts, ETFs, bonds, cash/cash like investments.

Vanguard is a popular option for a low cost broker if your interested in Funds. They wont have access to Shares or other types of investments outside of funds but they do provide a low cost service with an account fee of just 0.15%.

(3) ISA / Lifetime-ISA Stocks & Shares Account

YouTube Video coming soon to this page

An ISA stands for Individual Savings Account, and essentially it's a TYPE OF ACCOUNT IN THE UK. Which has the benefits of being a TAX WRAPPER for the money inside. Much like a Stocks and Shares account, it can buy Shares, funds, investment trusts, ETFs, bonds, cash/cash like investments but with additional benefits and restrictions.  

ISA/ Lifetime-ISA Benefits

  • Protect any gains from Dividend & Capital Gains tax
  • In the case of a LIFETIME ISA you can  get up to £1,000 paid in each year by the government

ISA Restrictions (Financial Year 2020-21)

  • Must be aged 18 or over & UK resident
  • Max can pay in 2020/21 Tax Year is 20,000
  • You can only open and pay into one Stocks & Shares ISA account per year
  • Tax year runs from 6th April 2020-5th April 2021, new tax year brings a new allowance
  • You can Mix and Match the 20k ISA limit between different ISAs

Lifetime-ISA Restrictions (Financial Year 2020-21)

  • Must be aged 18 & UK Resident, also must be under 40 (so the last age to open is 39)
  • Cant pay into the account past 50
  • Max can pay in 2020/21 Tax Year is £4,000
  • You can only open and pay into one Lifetime ISA account per year
  • Tax year runs from 6th April 2020-5th April 2021, new tax year brings a new allowance
  • You can Mix and Match the 20k ISA limit between different ISAs
  • Cant be accessed until 60 - without penalty (Unless buying 1st home or Terminally ill)

(4) SIPP Account

YouTube Video coming soon to this page

Much like a Stocks and Shares account & ISA accounts. A SIPP can buy Shares, funds, investment trusts, ETFs, bonds, cash/cash like investments but with additional benefits and restrictions.  A SIPP is a type of pension account that lets you consolodate other private pensions and manage the account yourself. Normal pension rules apply to these types of accounts.

Benefits of a SIPP

  • First, like an ISA your investments will grow free from capital gains and any dividend taxes
  • When you pay money into your personal pension, the government will automatically add basic rate tax relief (currently 20%)
  • If you pay income tax at 40% or 45% you can claim back even more through your tax return
  • Usually up to 25% of the money you have in a pension can be paid to you tax free and the rest is taxed as income

SIPP Restrictions (Financial Year 2020-21)

  • Your income has to come from a UK-based source.
  • The SIPP owner is under 75 years of age.
  • The SIPP owner resides in the UK.
  • The SIPP owner resided in the UK during the last five tax years, as well as when they set up the SIPP.
  • The SIPP owner had to be an active member of the SIPP when they first started depositing funds into that account.
  • The SIPP owner can only access this money when he/she’s 55 (57 from 2028). They are allowed 25% tax-free.

Dan Morristar

Talking Personal Finance and YouTube.