Freetrade ISA Review: Fees, Transfers, and How It Compares

What is a stocks and shares ISA?

A stocks and shares ISA is a type of tax-efficient investment account available to adult UK residents. 

Each tax year, you get a £20,000 allowance that can be used for saving and investing with your ISA account. If you like, you can use this whole amount for your stocks and shares ISA, but keep in mind that the allowance can change yearly. 

The main benefit of using a stocks and shares ISA is that for most investments held within the tax wrapper, you don’t have to pay dividend or capital gains (CGT) tax on any income or growth. This allows your portfolio to grow and compound over the years without being held back by a tax burden. 

Another significant benefit is that when you want to withdraw funds from your ISA, unlike with a pension, any money you take out doesn’t count towards your income for that year – meaning you pay no additional tax on your funds down the line.

Freetrade ISA at a glance

Types of Freetrade ISA accounts

There is only one type of ISA available with Freetrade:

1. Stocks and shares ISA account: this is for adults over 18 based in the UK and you can invest up to £20,000 into this type of ISA during the tax year.

How the platform works

The sign-up process is relatively straightforward. You’ll first need to download the Freetrade app to start setting up your account (it’s a digital brokerage, so everything is controlled through the app, but the company is Beta testing a web desktop interface).

Here are the steps to follow to set up your ISA:

1. Once you’ve got the app and registered, tap the profile icon in the top right of your app screen.
2. Choose to upgrade to a ‘Standard plan’ which includes an ISA account (there is also a ‘Plus plan’. For an extra fee, a SIPP is included and you get higher interest on cash).
3. You then just need to follow the prompts and enter your details to get set up with a stocks and shares ISA.

Before you begin signing up, it’s worth having to hand your:

• Your national insurance (NI) number.
• Current address.
• A debit card or bank details. 

You can open up your new account and start investing with just £2, so it’s an affordable option if you’re on a budget. Just keep in mind that you can only open and pay into one stocks and shares ISA account each tax year.

Freetrade ISA fees

The costs and fees for the Freetrade ISA are very low, and easy to understand. Here’s a table with everything laid out so that you can review the costs and fees yourself:

Pros and cons of the Freetrade ISA

Here’s a quick summary of the main advantages and disadvantages of the Freetrade investment ISA:

Transfer a stocks and shares ISA to Freetrade

It is possible to transfer your existing ISA over to Freetrade. Once you’re set up with your account and have your investment ISA open, you’ll need to fill out a transfer request form and send it to Freetrade.

Freetrade will then contact your existing ISA provider to begin a transfer, which they say could take 4 to 6 weeks. It’s free and you can transfer an existing stocks and shares ISA, a cash ISA or an innovative finance ISA (to be converted into a stocks and shares ISA).

If you are moving investments that are also available with Freetrade, an ‘in-specie’ transfer is possible. Any stocks or shares that aren’t supported will be liquidated into cash during the transfer and moved over as funds for you to spend on new investments.

Always make sure that you use the official Freetrade ISA transfer service. Don’t withdraw everything from your current provider and move it yourself because you could lose the tax protection you’ve built up over time.

How safe is the Freetrade ISA?

Freetrade is regulated by the FCA (Financial Conduct Authority), and is covered by the Financial Services Compensation Scheme (FSCS), which protects up to £85,000 of your deposits.

How to pick the right stocks and shares ISA

Finding the right ISA for you depends on what you’re looking for and how regularly you invest. Here are some things to look out for and questions to ask yourself when you’re trying to find the best stocks and shares ISA:

1. Does the platform offer commission-free trading in the UK, and how cheap are the platform and share dealing fees?
2. Is there a discount for frequent investors?
3. What is the investment choice like?
4. Can you access multiple accounts, such as a LISA or JISA?
5. How easy is it to use the platform, is there a mobile app?
6. Do you have to pick all the investments, or are there ready-made portfolios?
7. Is there a cheap FX fee if you plan on buying international shares?
8. How reputable is the provider?
9. Does the platform offer good customer service?
10. Are there any incentives like free stocks or cashback for joining?

The truth is, there’s no single ‘best’ ISA provider. It’s all about finding the one that fits your needs as an investor. Many platforms structure costs and fees differently. So some will work out cheaper for you depending on what you invest in and how frequently.

As mentioned, you can open and pay into one stocks and shares ISA each tax year. So, if you try one out for a while and don’t like it or find it expensive for your needs, you can always transfer to another platform down the line.

The bottom line – is the Freetrade ISA any good?

It’s hard to beat Freetrade for value, because buying or selling investments doesn’t cost you anything. Also, the platform is easy to use and the fees are simple to understand. 

To sum it up, Freetade’s ISA offering stands out because of:

• No commission on trades.
• Minimum investment of just £2.
• Over 6,000 investments to choose from. 
• Flat monthly platform fee. 

It’s one of the cheapest stocks and shares ISAs available on the market, especially if you’re planning to buy or sell investments frequently. The Freetrade app is very easy to use, even if you’re a beginner. The lack of complicated costs or hidden fees makes it an extremely appealing option compared to some other ISA providers. 

One of the only downsides is that Freetrade only offers a stocks and shares ISA, but this isn’t a major setback. Keep in mind this is a DIY investment ISA. So you’ll need to manage your portfolio yourself. Freetrade does offer the option to carry out an ISA transfer for you (and convert from other ISA account types), so if you’re looking to change providers or find a cheaper platform, this will make moving much more effortless.

Hopefully, this review of the Freetrade ISA has given you some insight into what it can offer you as an investor. Let us know how you get on in the comments and what you think of this account.

Is the Freetrade ISA tax free?

For the most part, yes. With a stocks and shares ISA, the majority of investments will be exempt from dividends tax and capital gains tax (CGT) – the only exception is US stocks that pay a dividend. With these investments, you’ll still have to pay a withholding tax.

Is Freetrade cheaper than Vanguard?

It depends on what investments you want to buy and how big your portfolio is. It’s hard to compare because both charge nothing to buy or sell investments (but Vanguard only lets you buy its own funds and no individual stocks). Freetrade’s £4.99 flat monthly fee will work out cheaper for investors with a large portfolio, but Vanguard’s 0.15% platform fee is better value if your portfolio is under £40,000.