Guides / Stocks and shares ISA in the UK: what it is and how it relates to the stock market

Stocks and shares ISA in the UK: what it is and how it relates to the stock market

A stocks and shares ISA is a tax-free account for holding investments such as company shares and funds. You pay no UK tax on income or gains inside it, and in the 2026 to 2027 tax year you can pay in up to £20,000 across all your ISAs, though the investments can still fall in value.

By MarketFrame · Published 9 October 2026 · Updated 9 October 2026

Short answer: you must be 18 or over to open an ISA, and the £20,000 allowance for the 2026 to 2027 tax year is shared across every ISA you pay into. Shares in companies, including FTSE 100 companies, can sit inside a stocks and shares ISA. You save tax on what they earn, but their prices rise and fall exactly as they would outside the account.

What a stocks and shares ISA is (and what the wrapper does and does not change)

An ISA is an account type, and the investments sit inside it. That is why people call it a wrapper: the wrapper decides how the contents are taxed, and the contents decide how the account performs.

A share held in an ISA rises and falls exactly as it would outside one. The wrapper takes away tax on income and gains. It does nothing to make the investment safer, and that is the point people skip past most often.

What you can hold inside one, including shares in FTSE 100 companies

Gov.uk lists what a stocks and shares ISA can hold:

shares in companies
unit trusts and investment funds
corporate bonds
government bonds
long-term asset funds

Gov.uk also says crypto exchange traded notes cannot be held in this type of ISA unless they were already there before 6 April 2026.

Shares in FTSE 100 companies fall under the first item on that list. FTSE Russell describes the FTSE 100 as the 100 most highly capitalised blue-chip companies listed on the London Stock Exchange. Companies join and leave the index over time, so this guide does not list the current members. MarketFrame's company and sector list shows the companies it covers.

You can't buy the index itself. You hold shares in individual companies, or a fund that tracks the index.

The annual allowance, tax years and how the limit is shared across ISA types

The figures on gov.uk:

The tax year runs from 6 April to 5 April.
For the 2026 to 2027 tax year, the most you can pay into ISAs is £20,000.
You can put it all in one account or split it across several accounts and ISA types: cash, stocks and shares, innovative finance and Lifetime ISAs.
You can pay up to £4,000 a year into a Lifetime ISA, and only into one Lifetime ISA in a tax year.
You must be 18 or over to open an ISA.

You can split the allowance but you cannot add to it. Money paid into a cash ISA and a stocks and shares ISA in the same tax year comes out of the same £20,000.

The cash ISA change from April 2027

The government has confirmed a change that starts on 6 April 2027. The overall ISA limit stays at £20,000, but savers under 65 will be able to put no more than £12,000 of it into cash ISAs. Savers aged 65 or over keep a £20,000 cash ISA limit. HMRC says the regulations were laid before Parliament on 14 September 2026. The change caps cash ISAs only, so the rest of the £20,000 can still go into a stocks and shares ISA.

How tax works inside and outside the wrapper

Gov.uk says you do not pay tax on income or capital gains from investments in an ISA, and you do not need to declare them on a tax return.

Outside an ISA, the same shares can lead to a tax bill. Dividends can be subject to Income Tax, and a profit when you sell can be subject to Capital Gains Tax, depending on your circumstances. Rates and allowances change, so check HMRC's current guidance on gov.uk before relying on any figure in an article. If your situation is complicated, a regulated adviser or tax professional is the right person to ask.

Dividends, and where reinvestment fits

Many companies pay dividends, which are a share of profits paid to shareholders. Inside an ISA, that dividend income is free of UK tax.

What happens to the cash is a separate choice. You can leave it as cash or use it to buy more shares. Reinvesting does not guarantee a better result. It only changes what you hold, and the extra shares can fall in value too.

Risk: why the value can fall, and what protection exists

The FCA says plainly that "the value of investments can fall as well as rise", and that anyone investing should be prepared to risk losing some or even all of their money. Share prices move with company results, the wider economy and investor mood. Holding shares in an ISA changes none of that.

Protection covers a different problem. If an authorised firm holding your investments goes out of business and there is a shortfall in the money or assets it held for you, the Financial Services Compensation Scheme (FSCS) may pay compensation:

Limit: up to £85,000 per eligible person, per firm, where the firm failed after 1 April 2019.
Condition: the PRA or FCA must have authorised the firm and regulated the service and product.
Not covered: poor investment performance. If your shares fall because a company does badly, the FSCS will not pay out.

Moving an ISA: transfers versus withdrawals

To move an ISA to another provider, transfer it. If you take the money out and pay it back in, you lose that part of the tax-free status. The steps on gov.uk:

Contact the provider you want to move to.
Fill in its ISA transfer form. The new provider then arranges the move with your old one.
Do not withdraw the money yourself. Gov.uk warns that if you do, "you will not be able to reinvest that part of your tax-free allowance again".

Worth knowing:

You can move all or part of an ISA, including money paid in this year or in earlier years, to the same type of ISA or a different one.
Transfers between cash ISAs should take no more than 15 working days. Other transfers should take no more than 30 calendar days.
Your provider may have its own restrictions and may charge a fee.
If a transfer is late, complain to your provider first, then to the Financial Ombudsman Service if you are not satisfied.
From 6 April 2027, savers under 65 will not be able to transfer money from a stocks and shares ISA into a cash ISA.

How to follow news on companies held in an ISA without treating it as a forecast

If you hold shares, you will probably want to know what is being said about the companies. MarketFrame reads the UK business news on every FTSE 100 company each morning, checks which stories are really about each company, and scores the tone of that coverage from -10 (clearly bad news for the company) to +10 (clearly good). Each company page shows the history day by day, with the headlines behind each score. Its 17 sector pages, such as banks, group related companies together. Start at the FTSE news hub or browse the daily overviews. The archive starts on 30 September 2026.

News tone is not a share-price forecast. A positive score does not mean a share will rise, and a negative one does not mean it will fall. Prices respond to many things, and the market may already have taken a story into account by the time you read it.

Ways to use it as context:

Look for changes, such as a run of negative coverage, and see which headlines caused it.
Read the original story through the link to the publisher before drawing conclusions.
Compare a company with its sector to see whether a story affects one company or a whole group.
Check what the company itself has said in its results and announcements on its investor relations site.

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Questions this guide cannot answer (platform choice, what to buy)

We do not name, compare or rank ISA providers. Costs, features and terms vary and change, and choosing well depends on your own circumstances, which a general guide cannot judge. Whichever provider you look at, FSCS protection only applies if the PRA or FCA has authorised the firm.

We also cannot tell you what to buy. Whether an investment suits you depends on your goals, how long you plan to invest and how much risk you can accept. That is a question for a regulated financial adviser.

Questions people ask

What is a stocks and shares ISA?

It is an account type that holds investments such as shares in companies, funds and bonds. Gov.uk says you pay no tax on income or capital gains from investments in an ISA. The account does nothing to reduce investment risk, so the value can fall and you can lose money.

How much can you put into a stocks and shares ISA each tax year?

For the 2026 to 2027 tax year (6 April to 5 April), the most you can pay into ISAs is £20,000 in total. You can put it all in one account or split it across several ISA types. From 6 April 2027 the overall limit stays at £20,000, but savers under 65 can put no more than £12,000 of it into cash ISAs.

Do you pay tax on dividends and gains inside a stocks and shares ISA?

No. Gov.uk says you do not pay tax on income or capital gains from investments in an ISA, and you do not need to declare them on a tax return. Outside an ISA, the same dividends and gains can be taxed under the normal rules.

Can you hold FTSE 100 shares in a stocks and shares ISA?

Shares in companies are the first item on gov.uk's list of what a stocks and shares ISA can hold, and FTSE 100 companies are listed on the London Stock Exchange. You can't buy the index itself. You hold shares in individual companies, or a fund that tracks the index. This is general information, not a suggestion to buy anything.

Is a stocks and shares ISA protected if the provider fails?

If an authorised firm fails and there is a shortfall in the money or assets it held for you, the FSCS may pay compensation of up to £85,000 per eligible person, per firm, for firms that failed after 1 April 2019. It does not cover losses caused by investments falling in value.