Do you / will you use ISAs?


(Mike Smart) #28

I have friends who are really interested in Freetrade, but are just not going to bother until the ISA is available.

So it is a little concerning the timings of both ISA and Android planned for the latter stages of Q1 2019, hopefully there will be a large(ish) gaps between the two releases for concern of overloading the system/operational functions.


#29

:point_up_2:Josh mentions he’s focusing on ISA’s. Also James shared a screenshot and there’s been other mentions so maybe it’ll be sooner than the end of Q1 19.


#30

Not for now at least as I’m still in a promotional period with Nutmeg where I should get around £100-150ish after having an S&S ISA with them for a year (can’t remember exact amount). Once I’ve pocketed that then I’ll re-consider.


#31

Is there a plan for JISAs as well?

Other platforms let you pay ISA fees from your general investment account. Will Freetrade offer the same eventually (when they let you have more than 1 account type at the same time)? This is important so that you can actually invest the max on your ISA, and not waste some of your allowance on fees.


(Vladislav Kozub) #32

Freetrade’s Head of Finance mentioned JISA before:


#33

I’m really interested in this as well. It would be great to pay the fees by direct debit or from gia rather than using the allowance on fees


(Rob Sexton) #34

We’re working on a few solutions to this at the moment, and will announce more in due course. But we recognise the benefit of not taking it from your ISA, so are working towards a solution that achieves just that


(Harry) #35

Would you not just top up gross of fees? Thats fairly common practice with asset managers and IFAs


#36

With my current ISA providers, I just ensure that there is a minimum cash amount available in the ISA account to pay for the fees.

If there is no cash there, the provider is entitled to sell some of my stocks to cover the fees and as they are not fee-free, this is an extra cost to me.

It will be interesting to see what solution Freetrade have for this.


#37

Not sure if I understood your question correctly, but the issue is when you’re at the limit allowed by the ISA. You can’t add more money to pay for fees, so some of the money you could have invested will be spent on fees instead.

To get around this, other providers let you pay fees from a different account.


(Harry) #38

You can subscribe more than the ISA amount so long as by the end of the tax year fees are taken from the ISA (this is the case with upfront fees anyway).


#39

Do you have a source that explains this? My reading of the plain English rules suggests that if you withdraw (to pay a fee), you can’t put that money back, unless it’s a flexible ISA. (I read that Freetrade’s initial offering will not be flexible).

Even if it was flexible I’m still not entirely sure how fees are regarded. I believe that companies that have flexible ISAs recommend having the separate account for fees, so I assume there’s still some kind of issue.


#40

I don’t believe this is correct - you can only pay £20k max into an ISA in this tax year. You can’t top this up to account for the fees.

The question for Freetrade to answer is whether they will take the fees from the ISA account or from another account.


(Kenny Grant) #41

I’d be happy if they just took the fee(s) monthly from the linked bank account - perhaps this is an option? Would require a direct debit or the promised open banking integration I guess. Same problems will apply to Alpha when that comes out, and I guess trading fees too - in theory it’d be best if all of those were not taken direct from the ISA, for people who max out their contributions. For people who don’t max out their ISA contributions, it doesn’t really matter.


(Harry) #42

It is certainly possible to contribute more than £20k to an ISA. You are not meant to and you get hit with a tax charge, but there is nothing that physically limits you (Freetrade could do this however).
If I contributed to a Freetrade ISA with £20,036 lump sum, and by the end of the tax year the £36 had been taken as fees, I would have contributed £20,000 to my isa that tax year. From HMRC perspective that is fair and wouldn’t be a tax charge. I assume my £36 will have to sit as cash within the account or in a sub account.

I don’t know if Freetrade will actually do/allow this, but it is possible.


#43

As I linked to, according to HMRC this is simply against their rules. They wouldn’t consider it “fair”. Some platforms might not enforce the limit, leaving it up to you to do it correctly, but when I and most people say something like “you can’t”, the implication is “if you want to follow the rules and avoid penalties”. We don’t mean it’s literally impossible.

It’s always possible to lie to HMRC, to try and cheat and use some loophole, but that’s hardly something that should be advocated here.


(Emma) #44

If you do alpha at £100 a year or £30/£36 for the ISA then that’s such a tiny % of a total £20,000 does it make a huge difference?

I know someone will answer using the word compounding…


#45

It’s certainly possible, only in so far that there’s nothing to stop you from putting in more, unless there are limits in place for the platform. And this doesn’t even account for people who contribute both to a cash ISA and a S&S ISA.

However, imagine if I had enough money to invest double, ie £40k into my ISA.

I then withdraw £20k by the end of the tax year, but my ISA will have benefitted from £40k’s worth of dividends, investment growth. I really can’t see HMRC thinking this would be ok to do otherwise everyone who could afford it wouuld be doing it!


(Harry) #46

Perhaps I haven’t explained myself well enough.

Firstly, let me make it explicit - I am not saying cheat HMRC. That is a very bad idea!

What is possible is to add funds to an ISA, to have the fees taken from your contributions before they enter the ISA wrapper, and to then have the net amount enter the ISA wrapper. You send your max contribution + the fees, the fees are taken, the max contribution enters the ISA wrapper.

Does that make more sense to you?


#47

Ah, that makes sense, but in practice how do platforms make this clear? Or how do you tell a platform “don’t put this amount into the ISA wrapper, use it for fees”?

I’d prefer the clarity of a separate account, or perhaps better yet, your fees are simply charged separately with an invoice (pay with your credit card) or direct debit (from your bank account).

I can only imagine, based on the screenshots, that for Freetrade we will pay the fees upfront with a card or DD before even getting access to the ISA account, and then the only money you transfer to that account is for investment purposes.