My accounts

Hi everyone. I am brand new to this and slightly confused. I opened an account with freetrade a couple of days ago. On the app I see I have an investment ISA and a basic account. Can you explain the difference and what each one is for?
Thank you

Hi there, this link should help in a more detailed description of isa https://www.fundcalibre.com/understanding-isa-investment-basics.

However. Essentially a basic account is literally just a holding account for whatever you buy and sell but means everything in that account would need to consider the affects of capital gains tax, dividend tax and their accompanying allowances that each person in the UK gets before having to pay tax.

An isa, is a basic account with a wrapper around it that currently (as things can change in the future) means that your holdings inside the wrapper aren’t subjected to tax and so is a tax efficient account.

You can invest a maximum of 20k per year in to an isa but if you’re starting smaller it may be that its not yet worth paying the £3 per month charge to hold investments in an isa if say you helps £100 worth of shares.

Thank you. So i would buy stocks and etf’s from which account? or both? I dont expect any specific advice,but I am trying to answer the following question.
I have some property rented, and I want to know if that rental income could go into the isa and therefore not be subject to tax.
Many thanks

1 Like

The asset is held in the ISA. You can only hold shares or cash in ISA’s.

You can put rental income in to an ISA but it will be taxed before you put it in.

1 Like

As noted above you can buy stocks and etfs in either, but the regular account will be subject to tax on capital gains and dividends if you exceed the respective tax thresholds.

The isa has a limit on the amount of cash you can contribute, but once in there in there - you can use it to transact stocks, etfs etc free from tax on your capital gains and dividends.

Neither will help you to avoid tax on your income from your property.

If I have an ETF that pays a dividend, can I choose the account into which the dividend is paid?

A rule of thumb (not advice). If investing very small amounts, very early on, the basic account makes more sense.

If you are investing larger amount, ISA makes more sense. Seeing as you are using money from a rental, I would suggest you may be on the larger amount.

The decision is yours and do your own research

It will be paid to whichever account the share is owned in, but you can withdraw and move it across, if you wanted