Professional Documents
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SECRETS OF ISA
MILLIONAIRES
For a long time, ISAs have been viewed as the
first port of call for investors looking to save for the future.
It’s easy to see why – ISAs offer a range declared on a tax return, and less tax interest is tax-free. Interest rates will vary,
of fantastic benefits including their tax- means higher returns. so shop around for the best deal using the
efficiency, flexibility and simplicity. best-buy tables which can be found in the
Any UK resident aged 18 or over (16 for press or online. Do watch out for headline
In this guide, we explain how ISAs allow cash ISAs) can invest. There is no upper grabbing introductory rates or temporary
you to shelter considerable sums from age limit and investors can withdraw bonuses though, as when these disappear
the taxman by profiling three Hargreaves their savings whenever they need to. savers can be left with an unattractive rate.
Lansdown clients who have built up ISAs Best of all, it often costs no more to
worth over £1 million by investing in the place cash or investments inside an ISA, Stocks and Shares ISAs – Those prepared
stock market. so many investors receive these benefits to accept more risk for potentially higher
free. Used regularly, the annual ISA returns might consider a stocks and
ISAs – THE BASICS allowance offers the chance to create a shares ISA. Within a stocks and shares
An ISA, or Individual Savings Account, is substantial portfolio sheltered from the ISA investors can choose from a range
not an investment in its own right. The best taxman, although remember tax rules can of investments including funds, shares,
way to think of an ISA is as a change, and the benefits will depend on investment trusts, ETFs, corporate bonds
‘wrapper’ in which investors can shelter individual circumstances. and gilts, so investors can take as much or
savings and investments from tax. Within as little risk as they are comfortable with.
an ISA investors pay no capital gains tax TWO MAIN TYPES OF ISAs Remember unlike cash all investments can
and no UK income tax on dividends or Cash ISAs – Cash ISAs operate just like fall in value as well as rise so investors could
interest. They don’t even need to be a normal savings account except the get back less than they invest.
IMPORTANT NOTES:
Before opening an HL Stocks and Shares ISA, you should be comfortable choosing your own investments and confident making long-
term investment decisions. If you choose to invest within an ISA, remember that investments can go down as well as up in value, so you
could get back less than you put in. The information in this guide was correct as at 11 November 2020. ISA tax rules can change, and their
benefits depend on your circumstances. We wrote this guide to give you useful information about ISAs, but it’s not personal advice.
If you’re thinking about investing and you’re not sure if a particular investment is right for you, please ask for advice. This guide is issued by
Hargreaves Lansdown Asset Management Ltd, who is authorised and regulated by the Financial Conduct Authority. November 2020
£20,000 ALLOWANCE ISA. They share their stories explaining
When ISAs (formerly PEPs) were first their reasons for investing in ISAs as well
introduced in 1987, each individual could as their investment strategies. They also
only contribute a maximum of £2,400 provide a selection of tips for ISA investors
each tax year. Today, investors can shelter to help them on their investment journey.
up to £20,000 from the taxman (2020/21 As of the end of
October 2020 we
tax year) meaning a couple can protect The ISA millionaires all asked to remain
£40,000 of their savings and investments anonymous for this guide so we have
from tax. referred to them as ‘Mr C’, ‘Mr L and ‘Mr have over 300 clients
M’. While all their stories differ, there are
The generous ISA allowance from the recurring themes to their ISA success who have built up
government means individuals and
couples can build significant tax-efficient
which crop up again and again.
These include the importance of:
an HL Stocks and
sums by tucking money away in an ISA Shares ISA worth
each year. • Contributing the maximum amount
to your ISA each year over £1million.
The ISA allowance can be split as you wish
• Investing as early as possible in the
between the different types of ISAs, as
tax year
long as you stay within the overall £20,000
annual allowance. • Not procrastinating – open and invest in
an ISA as early as possible
MR C FROM NORTH MR L MR M
YORKSHIRE FROM SUFFOLK FROM ESSEX
When did you start 1987 (when PEPs 1987 (when PEPs A few years after PEPs
your ISA? were introduced) were introduced) were introduced
Mr M from Essex
One area I currently like is emerging Q: What have you used your
MR M’s ISA TIPS: markets as I feel over the long term these ISA to save for?
• If you have money you won’t economies will grow more quickly than the A: I’ve used my ISA for long-term savings
touch for at least five years it developed world. I try to buy in this and to build a nest egg to help fund my
makes sense to have it in an ISA (higher risk) area when it has fallen out of retirement. I’m now retired and I plan
• Don’t worry about timing favour, as it did in the aftermath of Donald on spending my wealth outside my ISA
the market Trump’s election in November 2016. before I touch my ISA.
• Invest for the long term. When I invest in areas like emerging
markets and Japan, I tend to invest via I don’t think there is any point in having
collective pooled investments, such savings outside of an ISA unless you can
Q: Why did you initially invest as funds and investment trusts. This is save more than the ISA allowance.
through ISAs? because while I like these areas, I don’t
A: I first invested in ISAs a couple of know them well enough to pick individual If you’ve got money that you won’t touch
years after they launched when I realised companies to invest in, so I’m happy to for five years then it makes sense to have
they were for the long term and any leave it to a professional. it in an ISA. Not only because it is more
future capital gains and income would tax-efficient but I’ve found that in my ISA
be free from UK tax. Similarly, I like the biotech and technology I tend to make longer-term investment
sectors as I believe stocks in these sectors decisions which have performed better
I use my full ISA allowance each year and have huge potential. However, I don’t know than savings outside of my ISA.
put the cash in at the start of every tax the companies well enough so I’d rather
year. I don’t necessarily invest the money leave it to a professional to find the next Q: What top tip would you give
straight away but I make sure it’s in my ISA Apple or Amazon. ISA investors?
ready for an investment opportunity. A: Don’t overly worry about timing the
If I feel I know a company well enough I’ll market and try not to trade too frequently.
Q: How would you describe your buy individual shares. I tend to buy shares Investing is for the long term. You should
investment strategy? in large companies in the UK, Europe or buy something that if you had to put
A: I read lots of investment articles and the US. At the moment one long-term it away in a box for 10 years and forget
broker ratings on an ongoing basis. I view I have is that people in emerging about it you would be happy to hold it
use this research to note down shares or markets will increasingly aspire to Western for those 10 years. Don’t buy something
funds which look attractive. I’ll continue to lifestyles, so I hold large consumer staple simply because you think it is cheap and
watch these and if they suffer a setback I’ll companies that have strong international you’ll be able to sell it for 20% profit in
look to take advantage and invest. presences and can sell their products all 3 months’ time.
over the world.
5 REASONS TO OPEN
AN ISA WITH HL
1 4
Easy to set up – start an ISA More control – Manage your
online in minutes. Please note, ISA and other investments how
our service is designed for you want: online, by phone, by
clients who like to make their post or using the HL app.
own investment decisions.
2 5
UK’s number 1 ‘investment Wide investment choice –
supermarket’ – with more than You can invest in funds and
35 years experience helping shares as well as investment
investors, we are trusted with trusts and more.
over £100 billion by over
1.4 million clients.
3
Competitive charges – just
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0.45% p.a. (capped at £45 ABOUT THE HL STOCKS
per year for shares) to hold AND SHARES ISA
investments and no charges
to buy and sell funds.
View our ISA charges
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