Stocks and Shares ISAs have significant tax benefits. Any income or capital gains earned on investments held inside one of these wrappers is tax-free. I think this makes them the perfect vehicle in which to own UK shares.
And with that in mind, here are two growth investments I’d buy for my ISA today.
Stocks and Shares ISA buy
The first company on my list is Mr Kipling owner Premier Foods (LSE: PFD). Few UK shares can say they’ve surpassed all expectations over the past 12 months. But that’s just what Premier Foods has done.
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The company has reported a surge in demand for its products over the past year, producing exceptional profits and allowing management to tidy up the group’s balance sheet. As a result, after 13 years of rebuilding the business following the financial crisis, Premier Foods has now restarted dividends to investors.
Alongside its results for the financial year ending 3 April, the company announced it would be paying a final dividend of 1p per share for the first time in 13 years. The report showed a 60% year-on-year increase in operating profit.
I think this could be the start of a growth spurt. As such, I’d buy the company for my Stocks and Shares ISA right now.
But, of course, the business is exposed to the same risks that affect all UK shares. These include the potential for higher costs, which would reduce operating profit. In addition, an increase in interest rates may also increase the cost of the firm’s debt.
UK shares
The other company I’d buy for my ISA is Mitie Group (LSE: MTO). This is another growth investment. According to the company’s latest trading update, revenues in its fiscal third quarter increased 6.7%.
Meanwhile, the average daily net debt improved to a net cash position of £31m. For the same period last year, net debt was £313m.
On top of these positive figures, the company has won over £770m of new contracts. Organic revenue for the three months ended 31 December 2020 was £573.9m.
Based on these numbers, it looks to me as if Mitie is firing on all cylinders. And as the economy continues to recover from the pandemic, I think the company’s outlook should continue to improve.
That’s why I’d buy this company for my Stocks and Shares ISA right now. I think it’s likely the business will achieve further growth in the months and quarters ahead.
Unfortunately, unlike many other UK shares, Mitie has relatively thin profit margins. The group’s operating profit margin was just 3% in its previous financial year. That doesn’t leave much room for error if costs increase.
As such, this company may not be suitable for all investors as it may struggle in a harsh economic environment.
