With so many options for UK residents to save and invest tax-efficiently, it can be hard to find the right platform to use. So, we’ve created this Freetrade stocks and shares ISA review to give you an insight into what this particular broker can offer you.
The Freetrade ISA offers an affordable way to invest in a vast range of investments. Looking at the competition, Freetrade’s ISA offering stands out because of:
- Zero commission for buying or selling investments.
- Flat monthly platform fee.
- Well-designed app for investing.
Want to know more about the Freetrade ISA? To ensure you completely understand this account, throughout this Freetrade ISA review, we’ll explain everything you need to know. This will include all the fees involved, how it compares against competitors, and the steps you need to take to transfer your ISA.
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
|🗺️ Supported Countries
|💰 Investing Fees
|From £4.99 per month
|🎮 Demo Account
|📈 Portfolio Rebalancing
|💵 Minimum deposit
|Stocks, ETFs, investments trusts, REITs
Types of Freetrade ISA accounts
There is only one type of ISA available with Freetrade:
- 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:
- Once you’ve got the app and registered, tap the profile icon in the top right of your app screen.
- 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).
- 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:
|Freetrade ISA Fee
|From £4.99 per month
|UK & US shares
|FX (foreign exchange) fee
Pros and cons of the Freetrade ISA
Here’s a quick summary of the main advantages and disadvantages of the Freetrade investment ISA:
- £2 minimum deposit.
- Free trading when buying or selling stocks (other than an FX fee for international stocks).
- Well-designed app that’s beginner-friendly and easy-to-use.
- Over 6,000 investments available.
- Free withdrawals and no inactivity fees.
- Flat platform fee (no matter the size of your portfolio).
- Account set-up is easy.
- Active investment community and new features being added regularly.
- For smaller portfolios, the flat monthly fee isn’t as cheap as some percentage-based fees with other platforms.
- This is for DIY investors, so you’ll need to research all investments yourself as there are no ready-made portfolios.
- Not as much investing resources or trading tools as some other brokerages.
- No other ISA options.
- Low interest paid on idle cash compared to some other providers (in the Standard Plan).
- Everything is controlled using the app (no desktop support).
How it compares with other DIY ISA providers
Throughout this Freetrade ISA review, we’ve run you through most of the key benefits and downsides, but let’s take a look at how the Freetrade platform and its fees stack up against alternative DIY ISA providers:
|£500 or £25/month
|£100 or £25/month
|£500 or £100/month
|£1 (or no tradings fees with £25/month min)
|£2,000 or £100/month
|£3/month (or free if your trade fees are more)
|0.25%/year (max £3.50/month)
|£100 (one-off fee)
|£4/month min (or 0.2% funds + 0.1% other investments) – capped at £125/month
|Share dealing fees
|£3 UK shares/€3 European shares/from $0.005 US shares
|£1.5 for funds/£9.95 for stocks and shares
|£0 for funds/£11.95 for stocks and shares (reducing to £8.95 and £5.95 with more trades)
|£0 (only funds available, no individual stocks and shares)
|£3 funds/£6 other investments + £1 transaction charge
|£3.99 (you get 1 free trade a month, and some international shares cost £9.99)
|£9.50 for UK trades & funds (£0 for international trading and £2 for scheduled regular investments)
|Foreign exchange fees (FX)
|0.75% (reducing to 0.5% and 0.25% for large trades)
|1% (reducing to 0.75%/0.5%/0.25% for large trades)
|1% (reducing to 0.75%/0.5%/0.25%/0.1% for large trades)
|1.5% (reducing to 1.25%/1%/0.5%/0.25% for large trades)
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:
- Does the platform offer commission-free trading in the UK, and how cheap are the platform and share dealing fees?
- Is there a discount for frequent investors?
- What is the investment choice like?
- Can you access multiple accounts, such as a LISA or JISA?
- How easy is it to use the platform, is there a mobile app?
- Do you have to pick all the investments, or are there ready-made portfolios?
- Is there a cheap FX fee if you plan on buying international shares?
- How reputable is the provider?
- Does the platform offer good customer service?
- 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.
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.