Stock & Shares ISA


(Alex Sherwood) #21

I’m not sure where the “£100 a month” has come from. Our ISAs won’t be suitable for every investor but I was pointing out that there are more scenarios where they can be useful.

The fact that someone might only be investing £100 a month doesn’t automatically mean that they wouldn’t benefit from an ISA either e.g. if you’re increasing the size of your investment over the long term.


(Jeff puckering) #22

Sorry Alex I tried to use an example but was a bit too specific.

The article you posted was a response to statements like

From @Rollingskies, and you say

My original question was

As I still couldn’t find any benefits other than the benefits that exist for people with sums that could give returns above the thresholds (I.e. people with £20k plus toninvest)

Not looking for advice just looking for you to highlight what these additional benefits are in the article!


(Alex Sherwood) #23

No worries Jeff, they’re:

  • The growth of your investments is capital gains tax-free
  • Almost all your dividends are tax-free
  • You don’t have to do any admin for tax

It’s the most tax-efficient, convenient way for you to build a no-fuss, long-term portfolio.


(Ben) #24

Freetrade are wise to advise all clients to use an ISA as it is a one size fits all safety net they cannot be criticised for. While it also makes them money it’s still a good value for most investors. However remember You can make:
capital gains of 11,700
Dividends of 2,000
Interest of 1,000 basic tax payer or 500 for higher rate tax payer

…without paying any tax. If you want you spend 36 quid a year that fine. Unlikely to make a big difference and helps supports the site of which I am an investor in.


(Jeff puckering) #25

Great summary, but as much as I would like to give an extra £36 to a company I love there are no benefits to me (or anyone who isn’t making gains that need to be declared) I think I will keep my next few years of ISA charges that I don’t think I need to one side and use it in the next round of funding to both support freetrade and potentially give me a good profit in the future.

Looking forward to needing an ISA in a few years though! (If I can increase my savings :grimacing:)


#26

Until the government decides to change/remove these.

The dividends allowance was originally £5k from April 2016 and was reduced to £2k from April 2018. What next? £1k or less?

All the above are subject to change at the government’s whim, which is why I personally prefer the tax shelters of ISAs (and SIPPs).


(Ben) #27

They won’t reduce it by much more as it would be too much paperwork with not enough tax to justify it. Let’s say they did you’d then transfer it into an isa and the excess would be under the new limits.


#28

This however is reliant upon people a) being aware that there’s been a reduction (how many actually knew what the current allowances were?) and b) actually actively doing the transfer.


(Ben) #29

Indeed, so it is good to give people the information to make an informed decision. There is also the possibility that Freetrade could change their prices - and that is a lot more likely than the government reducing the allowances for the reasons I have said. I guess everyone will make their own decisions.

I will transfer 5k into freetrade once Android opens. If it goes well I will transfer another 5k. At the end of the 2019/20 tax year I will make a decision whether Freetrade is working as an investment strategy for me and then possibly transfer the full balance of me and my wife’s ISAs over and into an ISA each or maybe transfer out and back into the HL ISA where it currently is. I’m not rushing anything and while HL is expensive I feel it is as secure as I could hope


(Jim) #30

I admire your optimism.


(Kieran) #31

This is a Conservative government that are reducing the dividend tax threshold. Tory governments tends to be more pro-investor. If labour win the next general election (which they could well do with all the Brexit shenanigans!) then dividend taxes could be completely reformed. See this article about the 2018 labour conference.

ISAs are a long term play, I think if you are investing small amounts of money it’s fine to not use an isa go the first few years if it’s cheaper to do so (such as with the Freetrade GIA) but I think once you hit that first 20k of portfolio my recommendation would be to get yourself set up with an ISA. Even more so if you plan on increasing your monthly contributions.

The end goal of an ISA is very exciting in my view, if you have a large portfolio of a few hundred thousand that you have managed to slowly build up over many decades, dividends would always be tax free. That’s a pretty big deal when you think about it.


#32

How many ISA accounts do people think Freetrade will have open at the beginning of the new tax year in April ?
Out of 15,000 users I’m guessing 3,000.:freetrade:


(Kieran) #33

I’d definitely like to open an ISA with Freetrade personally. I currently have one with AJ Bell with is costing me close to £100 a year in annual custody charges! They also charge £1.50 to buy into funds and £10 for individual stocks. Funny thing is they were way cheaper than Fidelity too which is where I had my money prior.

£3 a month with no other charges is incredibly good value in comparison


#34

If you’re investing £50 a month, that’s 6%, notwithstanding that your portfolio may fall as well as rise, so it could compound the losses. At this amount, I wouldn’t use an ISA, but a GIA would seem more appropriate. Additionally if you’re also doing instant orders or buying US stocks with an FX conversion.

If you’re planning on investing higher amounts in the future, or lump sums then I’d go with an ISA.

The important thing is to work out what you can invest, and the cost/benefit of GIA vs ISA as it will vary for each investor.


#35

I had my first S&S ISA with Hargreaves Lansdown and was with them for several years. They have an excellent platform and customer service, are beginner-friendly, and in common with other established platforms have a much wider range of funds and stocks than Freetrade currently has.

Their platform fee is % based (0.45%). Depending on trade types and patterns this can work out cheaper than fixed-fee platforms when starting out (even compared to Freetrade ISA’s very low fixed fee) but at a certain point will get more expensive.

So one option to consider is to begin with a % fee platform and then transfer to Freetrade ISA just before your fees start to exceed Freetrade’s fixed fees (assuming Freetrade has started to support ISA transfers by then). Something to be aware of with this approach is transfer out fees. Lots of platforms (including Hargreaves Lansdown) sting you with these. If you do plan to start an ISA at a % fee based platform with the intention of transferring to Freetrade at a later date make sure you look for a platform that doesn’t charge transfer out fees. As has already been mentioned, Vanguard Investor is an excellent option to consider if you are happy with being restricted to Vanguard funds. They charge an extremely low % platform fee (0.15%) and don’t charge for transferring out.

I suppose another option is to use the the Freetrade GIA until you have a gain just below the CGT allowance or a holding just below the annual ISA allowance and then sell it and re-buy it within Freetrade ISA. An issue with this is you would use your entire ISA annual allowance for that year in one go.

I recently transferred my ISA from Hargreaves Lansdown to the fixed-fee Interactive Investor. At £90/year they are more expensive than Freetrade, but Freetrade isn’t an option for me right now because it does not accept ISA transfers yet. On the plus side, the platform fee at Interactive Investor also serves as trading credits (so for my trading pattern I won’t be paying any additional trading fees) and they don’t charge transfer out fees.

I chose Interactive Investor over Vangaurd because the fee for me is not that much higher than at Vangaurd, I want to hold more than just Vanguard Funds, and they currently have a cashback promotion which covered most of my HL transfer out fees. Haven’t been using long enough yet to comment on the quality of their service.


(David wilson) #36

Future changes to the isa allowance should be to allow a total investment of £x rather than investment into a single type each year…

For a smaller investor it makes me have to select a primary providet whilst at the moment I have a few. Smaller pots and trialling different options

What different is it if I have £1000 in freetrade a £1000 in nutmeg a £1000 in another platform…

Im sure Ive seen a repot saying they were reviewing a personal Limit and you could spread it…


(Jim) #37

For shares / ETFs the HL ISA is capped at £45 max ( dealing fees apply though )


#38

Yeah, the dealing fees and the exit fees is why I didn’t stick with HL in spite of this.

IIs cashback promotion gave me an opportunity to cover most of my exit fees and then potentially transfer to Freetrade ISA without exit fees at a later date.


(Jim) #39

With the £45 cap there’s no pressing need for me to transfer out my existing HL ISA, however new money this year will be going in via Freetrade.


#40

I was considering doing that too. But because the combined Freedtrade ISA + HL stock/ETF platform fees are not much different to II and because I ideally want to hold a couple of OEIC funds I decided to move to II for now.