I’m considering the possibility of permanently moving out of the UK in the upcoming months; it’s not decided yet though. All my ISA holdings are with Vanguard invested in their funds, but I’ve been considering Freetrade for a while as I want to invest in stocks.
With a quick search I found this from February:
The most important thing I take from the post is the linked help section which says:
You currently need to be a UK tax resident to use the app. If you move abroad and are no longer deemed a UK tax resident, please let us know as we’ll need to close your account.
Question 1: if I move out, can I keep selling/buying stocks with Freetrade? Or do I need to close my account?
Question 2: if freetrade does need(want?) to close my account, will they allow me to transfer the ISA to a different provider beforehand, or simply close my ISA without giving me an option?
I will speculate that this is something Freetrade can’t do as far as their current functionality goes. I.e. they either let you keep your account and continue all normal operations or they close it. They can’t do the former so they go for the latter.
In summary, its related to the money you put into your ISA than anything else. Essentially you can’t add to your ISA (put money into it) after you leave. However you can do whatever you want with the money thats in it. So:
Question 1 - You can keep buying and selling stocks. But you can’t add anymore money thats whats already inside it
Question 2 - Thats one for Freetrade but I assume the answer is yes. Although there is no reason they would close your account.
I understand there would be no reason to close it, but from the help section it seems that’s what they do. Sorry for asking this, but I want to be 100% sure: are you sure they would let me keep buying/selling and NOT close my account if I leave the UK? Or do you assume that because that’s how ISAs normally work?
That makes sense, but if instead closing it, they’d just freeze the account and allow us to choose either close or transfer, it would make us feel a lot safer. It sounds like a really important feature for them to simply have dismissed for so many years. Imagine putting money into an ISA for 10 years and then simply losing all those years because a company didn’t want to provide a simple feature to transfer it…
The bigger problem is that you may not be able to access your account if you move and update your App Store location. The app isn’t available in many countries and once updates are released you may not be able to log in.
VPN doesn’t matter it’s what you set your App Store location to. Eventually you’re going to get fed up changing it all the time and there’s the address issue.
Freetrade just isn’t setup for that kind of thing yet I don’t think
That’s a good point. But changing store location takes just a few seconds, I’d be fine with that tbh. If that were the only problem I wouldn’t mind. If that became a big annoyance, I could just setup another google account with the UK store.
For someone abroad to keep and ISA opens FT would have to allow them to still trade but not be able to add any money.
I honestly don’t see how this would be an issue. Very easy to implement.
Also their system would need to be able to hold the address of the new country, which many U.K. banks struggle to do actually.
That’s something I’ve noticed to be a global thing. Changing my address to an international one seems to be a problem for every single bank I have or had an account with (which, at this point, includes multiple banks spread across Brazil, US, UK and Portugal). That’s a global thing unfortunately. But all of them so far allowed me to update the address by sending them a message (rather than editing it myself through the system), and then having them call me to confirm. From a software engineer perspective, fixing this shouldn’t take more than a day or two of work. I don’t know if there would be any issues from a legal perspective though, and I assume that might be the case?
I believe the points you raised are not are not technical issues, they are more policy issues, or choices FT is making in applying this, which is their choice.
Thanks a lot for this info, it’s really useful. I had no idea. Since I haven’t moved out of the UK yet I didn’t have to deal with any of this. I didn’t have any problems moving out of any other countries. From posts in the Monzo community, it seems they are okay keeping your account when you move abroad (not sure if brexit will change it), so I might move all my money to the Monzo account and close accounts in other banks.
To conclude this topic, it doesn’t seem to be in Freetrade’s interests to keep users that leave the UK. Knowing this is enough for me to make a decision. I’d love to understand why, just out of curiosity, but I find it unlikely anyone not in the team would know.
There is also problem with non-UK dividends. Say, if you are Freetrade user, your US dividends get taxed by US at 15%, but the general rate is 30% and you get 15% because of double taxation agreement between the US and the UK. If you become resident of another country, there can be different double taxation agreement and Freetrade likely doesn’t have infrastructure in place to facilitate different rates. They will continue paying 15% to the US IRS, while maybe you need to pay 30% because you are resident in, say, Cayman Islands, you should be paying 30%, which would mean that you will be defrauding IRS and Freetrade is unwillingly assisting you - I don’t blame them, that they want to be safe.
Generally, I am not sure if it makes sense - unless you want to come back to the UK some time later? Then maybe.
Otherwise:
If you are moving to jurisdiction which doesn’t tax capital gains and dividends, then it doesn’t make sense to keep your money in UK ISA - just move it with you.
If you are moving to jurisdiction which does tax capital gains and dividends, you will still have to report and pay taxes for your ISA investments in your new country of residence. Again, it doesn’t seem to make sense to keep it in the UK ISA.
Also, from personal experience, in most countries CGT taxation rules are designed in such way that when you change residency it is much safer to have all your investments in cash, unless you know exactly what you are doing.
I moved abroad for a few years and kept my ISA opened.
If you have any chance you will return to becoming a UK resident at some point then you should never close your ISA.
Just find a provider that is find with your residency being abroad.
If I hadn’t kept my ISA opened I would have started again from 0 when I returned to the UK and be paying tax ever year on the rest of my investments.
As it is most of my investments are within the ISA significantly reducing my tax bill.
I don’t know whether I will return to the UK in the future. I’d like to keep my ISA because there is a big chance I would. Couldn’t freetrade just pass onto its users the responsibility of paying their taxes, or is it more complicated than that (maybe different rules per country)? I don’t understand much of this topic, so this is not a rhetoric question.
I’m also not sure why it’s safer to have all investments in cash when changing residency. Did you have any bad experiences with this you’d be willing to share? I just intended to keep my investments as they are, and declare them in my next tax return abroad.
Yes the responsibility is always on the user to pay taxes wherever they go.
It’s the same in the UK my brokers do not pay tax for me I pay tax on anything outside the ISA which I have to calculate myself.
The difficulty is freetrade would have to know the correct withholding taxes on dividends and possibly report to regulators there. If they don’t have enough users in that scenario there is no benefit to them spending money on supporting other countries.
I was with AJ Bell at the time who allow you to easily change residency online and you can also put in dual residency there.
Regarding changing residency - make sure you know how capital gains are calculated in the new country.
In my case I was moving from country with zero CGT to the UK. I had portfolio of shares, many of them for a long time with noticeable gains already accumulated. If I didn’t sell shares day before entering the UK (and purchased them back next day), I would have to pay UK CGT tax on all gain, doesn’t matter if they were accumulated in previous country of residency or in the UK. Which would be unfair and not something I’d love to do.
(for tax savvy people - bad & breakfast rule doesn’t apply if you were not resident of the country when you sold your shares, so I didn’t have to wait for 30 days to purchase them back).
So I am not saying that you need to sell your investments, just be aware - what tax you will eventually pay if you don’t sell and what tax you will pay if you do sell. There can be very different situations depending on which country you are moving from and to.
Regarding taxes - I agree with SmallCap, there is no problem for broker if you calculate your taxes yourself, the only problem is residency you declare for your withholding tax on dividends.
Thanks for the explanations. I’ve never owned any stocks that paid dividends, so never had to deal with this. I thought dividends could work the same way as capital gains - instead of freetrade withholding taxes, I’d just declare my gains when filing my taxes and pay it then.
Regarding changing residency - make sure you know how capital gains are calculated in the new country.
In my case I was moving from country with zero CGT to the UK. I had portfolio of shares, many of them for a long time with noticeable gains already accumulated. If I didn’t sell shares day before entering the UK (and purchased them back next day), I would have to pay UK CGT tax on all gain, doesn’t matter if they were accumulated in previous country of residency or in the UK. Which would be unfair and not something I’d love to do.
I’m aware of this, but it’s still a good point. I might sell a few before leaving, to make use of the tax free allowance for capital gains. As for the rest, I’d pay more taxes by selling them in the UK, so it’s worth selling after I move.
