Investing

Investing means putting money into things such as shares, bonds and funds with the aim of it growing over time, accepting that the value can fall as well as rise. That last part is what separates it from saving. Money in a savings account earns interest and, within the deposit protection limit of £120,000 per person per authorised firm, is protected if the bank or building society fails¹. Money in investments is not protected in the same way: the value of your investments can fall as well as rise, and you may get back less than you put in².

The trade-off is the reason people do it. Over long periods, investments such as shares have tended to deliver higher returns than savings accounts, but with much bigger swings along the way. Guidance for investors is clear about the time horizon: be prepared to keep your money invested for five to ten years, or longer, and for very high risk investments, plan for five, ten, or even 20 years³. It is equally clear about one thing investing is not: it is not suitable as a way to get out of debt³. If you are struggling with debt, free help is available from a debt advice charity, and the debt guide on this site sets out the options.

This guide covers what the main investment types are, where you can hold them, what they cost, how they are taxed, what protection exists, and what to do when something goes wrong.

Investing is not the same as saving

Saving and investing both involve setting money aside, but they behave completely differently, and the difference matters most at exactly the moment people notice it: when something goes wrong.

A savings account is a promise. The balance does not fall because of market movements, and the interest, whatever it is, is known in advance. Deposit protection sits behind it: FSCS protects up to £120,000 per person, per authorised firm, for deposits at banks, building societies and credit unions, and in most cases pays compensation within seven days of a failure⁷. NS&I, the government's savings provider, explains the same principle from the saver's side: tax-free accounts such as ISAs and National Savings Certificates keep returns out of the tax net¹⁰.

An investment is a stake in something whose value changes daily. A share is a slice of a company; a bond is a loan to a government or company; a fund is a basket of these things. None of them carries a promise about what you will get back. The Financial Ombudsman Service, which handles complaints about investments, puts the position plainly: the value of your investments can fall as well as rise, and you may get back less than you put in². Even products that sound safe, such as capital protected structured investments, carry risk that the ombudsman describes as similar to investing in the stock market, and greater than an ordinary savings account¹¹.

The practical test is time and need. Money you expect to spend within the next few years, an emergency fund, a deposit for a house, a bill that is coming, is generally held in savings because it cannot afford a fall. Money you can leave alone for five to ten years or more is what investing is for³. The choice is not either/or across your whole life: most people hold both at once.

Shares: owning a slice of a company

A share is a single unit of ownership in a company, and stock represents part-ownership in one or more companies¹². Buy a share in a company and you own a slice of it: its buildings, its brands, its future profits, in proportion to what you hold. If the company does well, the shares tend to be worth more and it may pay you a share of the profits, called a dividend. If it does badly, the shares are worth less, and shareholders are last in the queue if things go wrong entirely.

That last point is worth dwelling on, because it is the core risk of owning shares. Bond holders are paid before shareholders, and if a company enters administration, bond holders will be paid before shareholders¹³. A shareholder's loss is capped at what was invested, but the whole of it can be lost.

Most shares today are not pieces of paper in a drawer. They are held electronically, usually in the name of the share-dealing business, which means the shares are recorded as belonging to you even though the platform's name is on the register¹². This is normal and does not stop you being the true owner, but it is why the platform's own solvency matters less than it might seem: your shares are not the platform's assets.

How you buy and sell, what dealing costs, how dividends work and what happens in a takeover are each covered in dedicated guides: what shares are, buying and selling shares, how dividends work, and takeovers and share reorganisations.

Bonds: lending to governments and companies

A bond is a type of fixed-term loan. The issuer, which may be a government or a company, pays the holder a regular coupon, similar to the interest paid on a savings account, and returns the original sum, called the principal, at the end of the period¹³. There are two main types: government bonds and corporate bonds¹³. UK government bonds are known as gilts, and governments issue bonds to support public spending¹³.

Bonds are tradeable, and can be bought and sold up until the date they mature¹³. Their prices and yields are affected by credit ratings, interest rates, market conditions and time until maturity, known as duration¹³. The single most useful thing to understand about bonds is the relationship between price and yield: the price of bonds is inversely correlated with the yield, so if one moves up, the other moves down¹³.

Why does that matter to you? Because it explains the counter-intuitive behaviour that catches new investors out: when interest rates rise, bond prices fall. If interest rates rise, so will government bond yields, which pushes down prices¹³. The same logic applies to a company whose credit is downgraded: it will have to offer a higher yield to entice buyers, and the value of existing bonds will fall¹³.

Bonds have real strengths as part of a mix: a regular income, typically less volatility than shares, diversification, since when stockmarkets fall bonds often rise in value, and security, because coupons are paid before dividends and bond holders rank ahead of shareholders in an administration¹³. They also have real weaknesses: they tend to deliver much lower returns than shares in the long term, there is a risk of capital loss if the issuer defaults, they are highly sensitive to movements in interest rates, and fixed coupon payments may not keep up with purchasing power when inflation rises¹³. MoneyHelper makes the same point about fixed-rate savings bonds: your original investment will not hold its value in real terms if the interest you are getting is less than the rate of inflation over the investment period¹⁴.

The dedicated guides go further: bonds and corporate bonds, gilts, money market funds, and bonds vs equities.

Stocks and shares ISA: up to £20,000 a year tax free

A stocks and shares ISA is not an investment in itself. It is a wrapper: a tax-free account into which you put investments, and the wrapper is what keeps the returns out of the tax net. You can invest up to £20,000 tax free in a stocks and shares ISA each tax year⁴, and you can split that £20,000 allowance across multiple types of ISA¹⁰. The overall ISA limit remains £20,000 from 6 April 2027¹⁵.

What that means in practice is that dividends, capital gains and interest earned inside the ISA are not subject to the tax they would attract in a general account. HMRC's own guidance lists income from tax-exempt accounts like ISAs and National Savings Certificates among the things you do not pay tax on¹⁶. Outside an ISA, dividends are tax free only up to your dividend allowance, and other returns can fall within Income Tax and Capital Gains Tax¹⁶.

Two things about the wrapper are often misunderstood. First, an ISA does not reduce the risk of what is inside it. The value of investments in a stocks and shares ISA can fall as well as rise, and you may get back less than you put in². The tax treatment changes; the risk does not. Second, the wrapper does not automatically protect you from everything. The Financial Ombudsman Service confirms you can bring a complaint about your ISA to it, for example where you lost money because your adviser or investment company made an admin error or delayed a transfer or payment into your ISA account¹⁷.

The FCA's rules on high-risk investments also bite here: firms offering certain risky products to retail investors must follow conduct rules on appropriateness and risk warnings¹⁸. And for peer-to-peer lending held in an Innovative Finance ISA, the FCA is explicit that the ISA label changes nothing about the risk:

The wider ISA landscape, including cash ISAs and the coming rule changes, is covered in the ISAs guide, and where to hold investments is compared in ISA, pension or general account.

General investment accounts for money beyond your ISA allowance

Once the £20,000 ISA allowance is used up, the next stop for most people is a general investment account. This is an ordinary taxable account: the same shares, bonds, funds and trusts can be held in it, but without the tax shelter. Returns can fall within Income Tax on dividends and interest, and Capital Gains Tax on profits when investments are sold, subject to the allowances and rates in the tax on investments guide.

Providers structure these accounts in broadly the same way. Charles Stanley Direct, for example, offers an Investment Account that you can own by yourself or with a partner¹⁹. That joint ownership is one practical difference from ISAs, which are individual: a couple wanting to hold investments together may find a joint general account simpler, at the cost of the tax treatment.

The order of priority for most people is ISA first, then general account, because the tax-free space is use-it-or-lose-it each year. But there are circumstances where a general account makes sense anyway: money you may want to access in ways an ISA restricts, holdings too large for the annual allowance, or investments that are not eligible for an ISA at all. The general investment account guide covers the mechanics, and where to hold investments compares the options side by side.

Fees and charges on investment accounts

Investing is not free, and fees are the one part of the outcome you can know in advance. They come in several layers, and a platform that looks cheap on one layer can be expensive on another.

The first layer is the platform's own charge for holding your account, typically a percentage of the value held. The second is dealing. Which? explains how this works across the market: you might be charged each time you buy and sell a share, investment trust or exchange-traded fund, while fees for buying and selling traditional funds are less common²⁰. The third layer is the fund's own internal charge, the ongoing charges figure, which is taken from the fund before its returns reach you.

The fourth layer catches people buying overseas investments. Transactions on international shares and funds incur foreign exchange fees, and these vary by platform: Which? found they ranged from 0.45% to 1.5% on amounts up to £5,000²⁰. On a £5,000 purchase of US shares, that is the difference between £22.50 and £75 before any other charge, so it is worth checking before choosing a route into overseas shares.

The full breakdown is in investment platform fees and charges, dealing charges and fund charges and the ongoing charges figure. Stamp duty on share purchases is covered separately in stamp duty on shares.

Your money can fall as well as rise

This is the section people skip and should not. Every investment page, every platform, every fund document carries the warning because it is the single most important fact about investing: the value of your investments can fall as well as rise, and you may get back less than you put in².

Falls come in several forms, and they are not all the same:

• Market falls. Share prices move with the economy, with interest rates and with sentiment. Diversification across companies, countries and asset types is the main tool for reducing this risk, covered in diversification and asset allocation.
• Interest rate moves. Bond prices fall when rates rise, as explained above¹³.
• Inflation. Even a positive nominal return can be a loss in real terms if it is below inflation over the period¹⁴.
• Default. A bond issuer that cannot pay leaves holders with a loss, and shareholders rank behind bond holders in an administration¹³.
• Suspension. Some funds can suspend dealing, meaning you cannot sell when you want to, covered in fund suspensions.

The Association of Investment Companies frames the time dimension plainly: be prepared to keep your money invested for five to ten years, or longer, and plan for five, ten, or even 20 years if the investment is very high risk³. The longer horizon is not a guarantee of recovery, but a short horizon removes the possibility of one.

Risk is not one thing, and how much of it is right for you depends on circumstances, not on appetite for excitement. The investment risk guide covers the types of risk and how attitude to risk is assessed.

ISA rule changes from 6 April 2027

The ISA rules are changing, and the changes are significant for anyone using a cash ISA alongside investments. The government has amended the Individual Savings Account Regulations 1998 to reduce the annual cash ISA subscription limit to £12,000 for individuals aged under 65, from 6 April 2027²¹. For investors aged 65 and over, the annual subscription limit for a cash ISA will remain at £20,000²². The overall ISA limit remains £20,000¹⁵.

Alongside the limit change come anti-circumvention rules. From 6 April 2027, for investors under the age of 65, there will be no transfers from stocks and shares and Innovative Finance ISAs to cash ISAs, and there will be tests to determine whether an investment is eligible to be held in a stocks and shares ISA or is "cash like"²². The consultation that preceded the regulations set the same start date: the annual cash ISA subscription limit for investors below the age of 65 will be £12,000 from 6 April 2027²³. HMRC's tax-free savings newsletter summarises the key changes as taking effect from 6 April 2027²⁴.

One change has already happened. From 6 April 2026, Long Term Asset Funds are qualifying investments for the stocks and shares ISA and Junior ISA²⁵, a move the Treasury Committee had earlier noted would allow Long Term Asset Funds to be held in stocks and shares ISAs from April 2026²⁶.

FSCS protection for investments and where it stops

The Financial Services Compensation Scheme is the UK's compensation scheme of last resort. It is funded by a levy on the authorised firms whose customers it protects²⁷, it is free to use⁷, and it is triggered typically when a financial services firm is placed into an insolvency process, such as administration or liquidation²⁷. The Bank of England explains that the FSCS is an independent organisation overseen by the Financial Conduct Authority and the Prudential Regulation Authority²⁷.

For investments, the limit is £85,000 per person per authorised firm⁶. That is a different limit from deposit protection, which is £120,000 per person or company, per authorised firm, for money in banks, building societies and credit unions⁷. The two are often confused because they sit under the same scheme.

Where the protection stops matters more than where it starts:

• Only regulated activities count. FSCS protection applies only where the authorised firm's activity is regulated by the PRA or the FCA²⁸. If the activity was not regulated, there is no claim, however real the loss.
• Only authorised firms count. FSCS covers only financial services firms authorised by the FCA or PRA to do business in the UK⁷. An unregulated outfit is outside the scheme entirely, covered further in does FSCS cover unregulated investments?.
• Poor performance is not covered. FSCS's own guidance asks directly whether it protects financial advice and covers poor performance, and the answer for performance alone is no²⁹. Losing money on a legitimate, well-run investment is not a claim.
• Deposits and investments pay out at different speeds. For deposits, FSCS aims to pay compensation within seven days of a failure⁷. Investment claims are assessed individually and take longer.

FSCS covers seven different types of business: deposits, insurance policies, insurance broking, investment business, mortgage (home finance) advice or broking, debt management, and funeral plans⁷. Investment business has been protected since 28 August 1988³⁰. You can check whether your money is protected using FSCS's own protection checker³¹, and the guides on what happens if a platform fails and does FSCS cover poor investment performance? cover the boundaries in detail.

How to complain about an investment firm

When something goes wrong with an investment, the route to redress is fixed, and it starts with the firm, not the ombudsman. The ombudsman's guidance is explicit: before bringing a complaint to it, a formal complaint is made to the company involved¹¹. The same sequence applies whatever the product: with equity release, for example, the first step is explaining to the company what the complaint is about, and only if the response is unsatisfactory does the complaint go to the Financial Ombudsman Service³².

The process in order:

1. Complain to the firm in writing. Say what you are unhappy about and what you want done.
2. Give the firm time. For most complaints, a business has up to 8 weeks to consider it⁹.
3. Refer to the ombudsman if needed. If there is no reply, or the reply is not satisfactory, fill in the ombudsman's complaint form. A case handler is assigned and may ask for more information¹¹.
4. Refer in time. You need to make the complaint to the ombudsman within 6 months from the date on your final response⁹.
5. The ombudsman decides. It makes its decision using evidence from you, the financial business and any relevant third parties¹⁷.

If the ombudsman finds in your favour, it can tell the firm to put things right. Where you lost money because you received the wrong investments advice, it will tell the firm involved to put things right, and it may also award compensation for distress or inconvenience¹¹. The service is free and easy to use¹⁷.

Complaint volumes give a sense of scale. In the year to 8 July 2022, the ombudsman recorded 5,247 investment complaints from within the UK and 847 from outside the UK, 6,094 in total³⁴. In the first quarter of 2026/27, 61 complaints were opened about investment platforms and 42 about investment trusts³⁵. A much older parliamentary record is a reminder that the industry's shape has changed: in 2009/10, independent financial advisers accounted for 12% of investment-related complaints, compared with 29% for the banks³⁶.

Financial Ombudsman Service awards: up to £455,000

The ombudsman can award compensation, and the maximum depends on when the complaint was referred and when the events happened. The current limit is £455,000 for complaints referred on or after 1 April 2026 about acts or omissions that occurred on or after 1 April 2019⁸. The limits step down for earlier complaints:

Who can use the service is broad: it can usually help individual or joint consumers of a financial business that provides services or products in the UK, regardless of nationality or where they live³⁷. Two practical points from its own guidance are worth knowing. First, you do not need to pay anyone to represent you, for example a lawyer or claims management company⁹. Second, if you use AI tools when preparing your complaint, the ombudsman asks you to avoid entering personal information you would not want shared, to use AI only to help organise or present information, and to check the resulting text carefully⁹.

If the ombudsman thinks the business treated you unfairly, it will tell them to put you back where you would have been if they had not made a mistake, and possibly make an award for distress and inconvenience³⁸. The award is binding on the firm if you accept it.

Who provides investing in the UK

Investing in the UK is provided by several kinds of firm, and most people encounter them through a platform. Investment platforms are online services that hold your account, your cash and your investments in one place, and let you buy and sell shares, funds, trusts and ETFs; Which? describes how they work, including the fee structures set out above²⁰. Some platforms are attached to high street banks, others to fund managers, others to stockbrokers that have been in the market for decades. Charles Stanley Direct, the direct-to-consumer arm of a long-established stockbroker, is one example, offering accounts that can be held alone or with a partner¹⁹.

Behind the platforms sit the fund managers, the firms that actually run the funds: Artemis, for instance, publishes the bond fund guidance quoted in this guide¹³. Investment trusts, covered in investment trusts explained, are companies listed on the stock market in their own right, and the Association of Investment Companies represents that part of the market³. NS&I provides government-backed savings products, including tax-free options, from the National Savings side of the market¹⁰.

Advisers sit alongside all of this for people who want help choosing, and the difference between execution-only, advisory and discretionary services, meaning buying yourself, being advised, and handing decisions to a manager, is covered in execution-only, advisory and discretionary services compared. The cost of advice is covered in how much does a financial adviser cost?. A directory of pension and investment providers is listed at pension and investment providers.

Checking a firm and avoiding investment scams

Before handing over money, check who you are dealing with. FSCS's own advice if you suspect an investment or pension scam is to check the details of the investment and whether the provider is genuine on the FCA's website³⁹. FSCS also provides a protection checker so you can see whether your money is protected³¹, and it publishes the warning that it only covers firms authorised by the FCA or PRA to do business in the UK⁷.

The checks that matter:

• Is the firm authorised? Only authorised firms can be covered by FSCS at all⁷. The FCA Register shows who is authorised.
• Is the activity regulated? Even with an authorised firm, protection applies only where the activity is regulated by the PRA or the FCA²⁸.
• Is the investment eligible for the wrapper you are using? From April 2027 the "cash like" tests will restrict what can sit in a stocks and shares ISA²².
• Does the return being promised make sense? Guaranteed high returns with no risk is the shape of an investment scam, covered in investment scams: warning signs and what to do.

If you have already paid money to a scam, FSCS publishes guidance on what to do if you are a victim of fraud³⁹, and the wider picture is in the scams and fraud guide. Free, impartial help is available from MoneyHelper, the government-backed money guidance service, and complaints about regulated firms go to the Financial Ombudsman Service free of charge¹⁷.