I notice the ISA is 5.99 a month and GIA free.
Is there a point where the ISA works out cheaper than a GIA? I am not sure whether to open one here or anywhere else or not bother.
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Hi Ben. When I first joined Freetrade I started with the GIA and soon decided to open an ISA. It really depends on the size of your portfolio or how much you intend to invest, as some competitors charge a percentage of the portfolio value which can work out cheaper. But be aware that they can also charge per trade, so again depends how often you intend to buy stocks. There are also some providers who don’t charge for their ISA if you just want to stick with ETF’s for example.
Another consideration is the tax implications, thresholds such as dividend taxes are being reduced year on year so an ISA is definitely the most efficient way if you don’t want to worry about paying any tax on your gains. Note you still have to pay stamp duty on UK stocks and some foreign markets can withhold a percentage from any dividends paid.
My advice would be to visit the learn section of the Freetrade website and get yourself up to speed with the basics. Also there are a lot of really helpful posts on this forum.
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Interesting question.
I have put mine into an ISA and the main reason for it was I can’t be bothered to fill in a tax return every year. The Dividend allowance for the UK is either 500 or zero so I would have to spend some time calculating my dividend income for the tax year and then declaring it? (I’ve never done a tax return before no idea how it works).
I reckon with the value of my portfolio I probably just about break even now the theoretical tax would be same as the fee.
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I believe the benefits of the ISA kick in around the £13,000 portfolio size mark as that is when the typical portfolio will make around £500 per year in dividends and that is the threshold for dividend tax
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Would say Capital Gains Tax exemption equally if not more important.
But difficult to answer the original posters question on when a threshold is likely to be hit to warrant an ISA, unless you have a good idea?
Use an ISA. If you can’t justify £50/year for it then either reconsider if shares are a suitable investment choice or open up a free one elsewhere.
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I’m thinking there isn’t a straight answer. If, for example example, you are a dividend investor. You would have to guess dividend yields at the start of the year.
I have the ISA as l only want to have the simple task of keeping my SAYE and BAYE schemes at work within the limits.
There is a straight answer. Use an ISA. It’s a long term tax shelter.
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also a thought I had, if you are growing your pot over the years and want to use interest to replace income, is it possible that you may not pay any interest tax due to total income being under 12500? for example if you quit work or went part time.
The amount of interest on cash in a GIA would be immaterial. It’s more dividend income and capital gains you would need to consider.
I believe you can use dividend income/savings interest against your personal allowance. see below
Not sure about CGT. below response seems to suggest not.
https://community.hmrc.gov.uk/customerforums/cgt/6900d06b-2ad5-ed11-9ac4-00155d9c773c
Personally i would not bother investing in a non tax sheltered account.
If you’re careful not to exceed capital gains, dividends and personal savings allowances, it would work out better to use a GIA then switch to an Isa.
I’d look at it in proportional terms. Say you invest less than £7,200 in an Isa – £72’s over 1% in the first year when you could be paying zero or 0.15% to Vanguard.
The nice thing with FT’s flat fee is the bigger your balance, the cheaper it becomes: £10k, 0.72%; £20k, 0.36%; £50k, 0.14%; £100k, 0.07%; and so on.
On the first £10-15k or so, tax should be a non-issue, so I’d just throw money at a cheap tracker in a GIA until you need to shelter your investments.
I only have a GIA with FT. My ISAs are elsewhere because that suits me better.
What’s right for you will depend on the size of your investment and your priorities.