Almost four million investors pay into stocks and shares ISAs each year, in a bid to shield their money from tax and boost their wealth.
Investors are allowed to contribute up to £20,000 into these tax-efficient accounts each tax year, and hold a range of assets from funds and investment trusts to bonds and shares.
In 2022/23, 3.8 million people paid a total of £28 million into their stocks and shares ISAs, according to the latest HMRC data.
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But have you ever stopped to think about exactly which investments are allowed inside ISAs?
The taxman has a comprehensive list of what is a “qualifying investment” and can be held in a stocks and shares ISA, but the rules are fairly complicated – and can catch out investors and even ISA providers.
A recent investigation by City AM found that investment platforms including AJ Bell, Fidelity and Interactive Investor had incorrectly allowed shares that shouldn’t get tax-free status to be added to ISA portfolios.
With this in mind, we’ve put together a handy list of common investments that are allowed in stocks and shares ISAs – and some that aren’t.
Whether you’re an early-bird investor and are topping up your ISA now for the 2025/26 tax year, or a beginner investor wanting to learn the rules, our list should help you work out what you can and can’t hold in your ISA.
Which investments can I hold in a stocks and shares ISA?
HMRC has a list of 20 “qualifying investments” for ISAs, but some of these are rather obscure.
For example, if you used to have a personal equity plan (PEP) – PEPs were later replaced by ISAs – any PEP investments that qualified as ISA investments on 6 April 2008 are allowed in ISAs.
However, where any of those investments subsequently changed, they would need to meet today’s ISA rules to continue to be eligible to be held in an ISA.
Certain life insurance policies can also be held in ISAs.
While HMRC’s list is fairly long, it doesn’t mean that your ISA provider will necessarily offer all of these investments for you to choose for your stocks and shares ISA.
Holly Mackay, founder and CEO of Boring Money, says she thinks the ISA rules are quite broad in terms of what you can hold and should satisfy most people.
“The rules give the majority of us access to a huge range of choice, without allowing access to highly risky assets not suitable for the average retail investor, or bending the rules to give tax breaks to people for personal assets whose primary reason is not really investing.”
Here, we highlight some of the most common assets you can hold within a stocks and shares ISA.
1. Shares
Company shares that are publicly listed on recognised stock exchanges anywhere in the world can usually be held within a stocks and shares ISA. This includes shares traded on the alternative investment market (AIM).
Note that “recognised stock exchange” can trip some people up. Examples of stock exchanges not recognised by HMRC include the Shanghai Stock Exchange, Saudi Stock Exchange, and Taiwan Stock Exchange
So, shares in Taiwan Semiconductor Manufacturing Company (TSMC), which has a primary listing on the Taiwan Stock Exchange, are not allowed.
TSMC has a secondary listing on the American Nasdaq, through an American depositary receipt (ADR), but it is still not eligible to be held in an ISA.
Dave Beaston, technical manager at The Investing and Saving Alliance (TISA), tells MoneyWeek that depository receipts catch out quite a few ISA providers.
He explains: “A depository receipt (an example, an ADR) is a tradeable instrument issued by a bank that represents shares in a foreign company.
“For stocks and shares ISA qualification purposes, a share has to be either ‘listed on a recognised stock exchange or admitted to trading on a recognised stock exchange in either the EEA or the UK’. The rules for depository receipts state that the underlying shares represented by the depository receipt have to meet this listing/trading requirement.”
According to Beaston, you could have, for example, an ADR which is listed on the New York Stock Exchange (which is a recognised stock exchange) representing shares in a company, whose shares do not meet the ISA qualifying test. This ADR would not, therefore, qualify for a stocks and shares ISA.
He adds: “Some ISA managers believe that the ADR is ISA qualifying because it is listed on a recognised stock exchange (NYSE in my example), not realising that it is the underlying shares that have to meet the ISA listing/trading requirement.”
City AM found that some investment platforms allowed customers to add TSMC, Chinese company Legend Biotech and/or Dutch telecom firm Veon (which trades only as an ADR on the Nasdaq) to their ISAs, despite not being eligible. The platforms removed access to these stocks once informed by the newspaper.
2. Funds
There are several types of investment funds that can be held in an ISA, including unit trusts and open-ended investment companies (OEICs). These can be passive or actively-managed.
Funds are likely to be a popular investment for stocks and shares ISAs, and platforms often offer a huge range, from niche funds like those that invest in a sector like property or clean water to those that invest in global equities.
Ready-made portfolios, which are managed by the investment platform, should also be eligible for an ISA.
3. Investment trusts
The HMRC list of approved ISA investments includes “shares and securities in qualifying investment trusts”.
Investment trusts are similar to funds as they pool your money with that of other investors to get exposure to a range of assets. The key difference to funds is that they are set up as companies and traded on the London Stock Exchange.
4. Exchange traded funds (ETFs)
ETFS are also allowed in stocks and shares ISAs. ETFs are listed on a stock exchange, so you can buy and sell them whenever the exchange is open.
They are a type of passive investment fund, and are usually much cheaper than buying actively-managed funds.
5. Corporate bonds
Corporate bonds are permitted inside ISAs. A corporate bond is basically a way of lending money to a company. In return, it pays you a regular income in the form of interest for a set period of time (known as the “coupon”), after which it must repay your loan.
6. Gilts
Government securities like gilts are qualifying investments for stocks and shares ISAs. Governments issue bonds to raise money to finance big projects or for day-to-day operations; a bond issued by the UK government is called a “gilt”.
The HMRC guidance states that “securities issued by or on behalf of a government of the UK or the government of any EEA state” are also allowed in ISAs.
7. Fractional shares
Fractional interests of a whole share - known as fractional shares, for short - are allowed in ISAs, but make sure you follow the HMRC rules.
For example, the fractional interest must be held by an ISA manager approved to offer stocks and shares ISAs, Junior ISAs or Lifetime ISAs. The relevant whole share must also be a “qualifying investment for the purposes of the ISA regulations”, and officially listed on a recognised stock exchange or admitted to trading on a recognised stock exchange in the UK or the EEA.
If you’re wondering what a fractional share is, this is where an investor holds a portion of a single share, particularly where a single share is expensive and costs hundreds of pounds.
Which investments can’t be held in a stocks and shares ISA?
Some investments are not allowed to be held within a stocks and shares ISA. We’ve listed five below.
1. Cryptocurrency
Cryptocurrencies such as Bitcoin cannot be held within a stocks and shares ISA.
However, you can invest indirectly by purchasing shares in firms that are heavily involved in the cryptocurrency sector, such as the cryptocurrency broker Coinbase.
Or via a fund that holds crypto-related investments, like the iShares Blockchain Technology UCITS ETF.
2. Gold
Physical gold bars and gold coins cannot be held in an ISA. If you want to put the yellow metal in your ISA, consider buying a gold fund or ETF.
Alternatively, you can get indirect exposure by purchasing shares in a mining company.
3. Alternative assets like fine wine and art
Alternative investments like fine wine, art and classic cars are not allowed within an ISA wrapper.
Like with gold and crypto, you could find a company or fund that is closely aligned to a passion investment instead, and buy shares or units in the fund with your ISA.
4. Property
You can’t hold direct property investments within a stocks and shares ISA. However, there are plenty of property funds and investment trusts that are eligible for an ISA portfolio, so you could consider buying those instead.
5. Unlisted shares
As we mentioned earlier, shares that aren’t publicly traded on a recognised stock exchange can’t be held within a stocks and shares ISA. This means shares in private companies are not allowed.
What happens if I buy an investment that isn’t allowed in a stocks and shares ISA?
The responsibility to ensure that only qualifying investments are held in a stocks and shares ISA falls on the ISA manager, rather than the investor.
Beaston at TISA explains: “So, for example, if an ISA manager offers some kind of ‘self-select’ internet-based ISA where ISA investors manage their own ISA and select their own investments, should the ISA client purchase a non-qualifying investment in their stocks & shares ISA, this would be treated as an ‘ISA manager error’.”
If a non-qualifying investment is held in the ISA, the ISA manager must remove it as soon as possible “or within 30 days where the investment has been received through some kind of corporate action eg. a rights issue”, according to Beaston.
He adds: “Such a breach can result in a financial penalty being charged to the ISA manager.”
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