This article is part of the special series, Investing with ISAs.
Investors can place a number of different kinds of investments within their Individual Savings Accounts (ISAs). While cash ISAs are specifically designed to hold cash and cash-like products, stocks and shares ISAs can hold many different investment products, including shares, funds, investment trusts, ETFs and bonds.
Below is a list of the investment products that can be placed inside your stocks and shares ISA, as well as an overview of some products that cannot be placed in ISAs.
ISA-Eligible Investments
According to the HMRC, the investments listed below can be placed within a stocks and shares ISA:
- Shares issued by companies officially listed on a recognised stock exchange anywhere in the world
- Corporate bonds issued by companies officially listed on a recognised stock exchange anywhere in the world
- UK government gilts and similar securities issued by other governments in the eurozone
- Funds (unit trusts, OEICs, ETFs and UCITS), which are authorised by either the Financial Services Authority (FSA) or considered by the FSA to be "UK-friendly". Essentially, these funds must have 'UK reporting status' in order to be eligible. (Any funds that are domiciled outside of the UK and do not carry the 'UK reporting status' stamp are ineligible.)
- Units or shares in non-UCITS retail schemes that are considered by the FSA to be "UK-friendly"
- Shares in investment trusts
- Shares from an HMRC-approved employee share scheme
- Life insurance policies
- Stakeholder medium-term products
- Cash may be held in a stocks and shares ISA if the investor has plans to eventually invest this money in one of the above qualifying investments
Investments that are Not ISA-Eligible
It may seem as if there isn't much of a limit on what you can invest in within your stocks and shares ISA, but be aware that some products are not ISA-eligible.
Small-cap companies and start-ups that are quoted on the Alternative Investment Market (AIM) are not currently eligible for inclusion in an ISA. However, the government is considering making these investments ISA-eligible in the future.
As mentioned above, funds and ETFs that do not have 'UK reporting status' also cannot be included in ISAs. Therefore, investors should ensure that funds are "UK friendly" before making a purchase.
It's also worth noting that subscription shares can be held in ISAs but warrants cannot. Warrants and subscription shares offer investors the right, but not the obligation, to buy into an investment company at a pre-determined price in the future.
Check out the HMRC website to find out exactly what can and cannot be placed inside a cash ISA.