Bloomsbury Financial Planning

Traders can invest up to £7,200 per tax year in a self-select stocks and shares Isa. Alternatively, up to £3,600 of that allowance could be put into a cash Isa with the remaining £3,600 invested in a stocks and shares Isa.

The financial perks for traders investing in these accounts are numerous with capital gains and interest sheltered from tax.

In addition, dividends are only subject to basic rate tax – even for higher-rate payers. Income from fixed-interest securities, such as Permanent Interest Bearings Shares (Pibs), gilts and corporate bond investments, is also tax free.

The investment universe within these tax-efficient shelters is wide, with traders going down the DIY route able to choose from a range of asset classes to reflect their appetite for risk and return.

Permitted investments include shares and bonds issued by companies listed on recognised stock exchanges; gilts issued in the

UK

and by overseas governments; units or shares in investment trusts; Oeics; and authorised non-Ucits retails schemes.

Shares held in approved employee share schemes, such as Save As You Earn (SAYE) and Share Incentive Plans are also permitted investments in Isas, along with life insurance policies and real estate investment trusts (Reits) which invest directly in commercial and residential property.

But while these investments could offer self-select traders a wide range of ways to obtain their goals, from capital growth to income, not all stockbrokers offer full flexibility.

“You will find that most stockbrokers aren’t interested in providing access to anything that looks a bit near the margin of the rules, or is a non-mainstream investment,” says Jason Butler, chartered financial planner with Bloomsbury Financial Planning.

“Just because HMRC rules allow something, doesn’t mean it is available from providers,” he says.

Hoodless Brennan, the execution-only internet broker, is one provider that excludes unit trusts, Oeics, Ucits and gilts or bonds from its self-select stocks and shares Isa because it does not deal in those products.

A handful of providers offers the full range of investments, though, including funds which invest in more “marginal” areas such as timber, funds of hedge funds, alternative energy and even secondhand life policies.

“Our Isa can hold London-listed funds that invest in these areas,” says Mick Gilligan of Killik & Co. “I believe our self-select product is as flexible as the rules will allow.”

Barclays Stockbrokers, the country’s largest online broker, earlier this year launched its Investment Isa, which offers access to a number of asset classes including Reits and structured products, such as investment notes.

Barclays’ investment notes typically have a five-year term and give the investor the chance to diversify their portfolios by allowing access to a wide range of underlying assets such as shares, commodities, indices or a combination of all three.

Reyker Securities, the execution-only broker, Redmayne-Bentley, one of the

UK

’s largest independent stockbrokers, and Abbey Sharedealing, which is part of Santander Private Banking and provides services through Cater Allen and James Hay, will take any investment permitted under the rules, set by HM Revenue & Customs.

Some brokers will offer their DIY clients access to a wide range of collective investments but not on an execution-only basis.

“The vast majority of our self-select Isas will access funds via a funds supermarket platform that will allow them to purchase unit trusts and Oeics,” says Nigel Parsons, investment manager with Bestinvest.

“We do, however, run self-select Isas that offer the full range of permitted investments. Typically, these are attached to other accounts which we manage on a discretionary/advisory basis.”

Hargreaves Lansdown offers investors access to more than 2,800 funds, including unit trusts, Oeics and SICAVs, or open-ended collective investment schemes, through its Vantage self-select Isa alongside ETFs and other popular investments. However, it does not allow clients to hold all structured products.

“When the information on one of these products comes across our desks, then we will review them to see if we think we can hold it,” says Ben Lundie, head of Vantage Development with Hargreaves.

“In most cases, a structured product with a fixed life will not be eligible because of the admin- istration factors which can exist.”

With such variety in the investments brokers offer, financial advisors say that traders should be sure about their risk profile before deciding whether they want to take full advantage of their Isa options.

“Some assets on the ‘margins’ can offer good returns, but not without considerable risk to the portfolio,” says Bloomsbury’s Butler.

“It’s much better to hold a diversified index portfolio and rebalance it when it goes out of line than taking big bets on single asset classes or themes. Forget looking for the needle in the haystack. Buy the haystack (the market) instead.”