Interactive Brokers ISA Review: Fees, Transfers, and How It Compares

What is a stocks and shares ISA?

A stocks & shares ISA, also known as an investment ISA, is a tax-efficient investment account. This type of tax-efficient investment account is available to adult UK residents.

The tax-free ISA annual allowance limit for 2022/23 is £20,000. You can put your tax-free allowance into one ISA account, for example, the stocks and shares ISA. 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.

Interactive Brokers (IBKR) ISA at a glance

Types of IBKR ISA accounts

There are two types of ISA accounts available with Interactive Brokers:

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.
2. Junior ISA (JISA) account: allows you to invest on behalf of someone under 18. You can invest up to £9,000 each tax year, which doesn’t count towards your annual allowance. The child can only access the account once they turn 18.

How it works

The sign-up process is relatively straightforward. You will first need to sign up for an account with Interactive Brokers. During the registration process, if you are a UK resident and select a GBP (pounds sterling) based account, you’ll be given the option to open a stocks and shares ISA.

You’ll need your personal details (including your address and national insurance number) when signing up. It doesn’t cost you anything to open up an IBKR account, and there’s no annual platform fee or minimum deposit. 

So, you’re able to open up an ISA quite easily. Just keep in mind that you can only open and pay into one stocks and shares ISA account each tax year.

Interactive Brokers ISA fees

The costs and fees for the IBKR ISA are very competitive and straightforward. Here’s a table with everything laid out so that you can review the costs and fees yourself:

Pros and Cons of the IBKR ISA

Here’s a quick summary of the main advantages and disadvantages of the Interactive Brokers ISA:

Transfer a stocks and shares ISA to Interactive Brokers

It is possible to transfer your existing ISA over to IBKR. You’ll need to contact Interactive Brokers directly and file an ISA transfer request (via the transfer and pay funding page in the Client Portal).

Once you’ve done this, they will contact your existing stocks and shares ISA provider to initiate a transfer. Your existing provider has to let you transfer out if you choose to, but it can take up to 30 calendar days. There’s no charge for an ISA transfer, but not all providers will be supported.

Suppose you hold securities or assets in your existing stocks and shares ISA that are not supported on the Interactive Brokers platform. In that case, you’ll need to first sell (liquidate) these and convert them into cash to be transferred over, and then you can buy similar (or different) investments.

Always make sure that you use the official Interactive Brokers 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 Interactive Brokers ISA?

Interactive Brokers is regulated by the FCA (Financial Conduct Authority), but it is not covered by the Financial Services Compensation Scheme (FSCS) because your account is technically held with the US affiliate. 

However, this means you get more protection as a member of the SIPC compensation scheme in the US. This means if the company was to fail, up to $500,000 of assets would be protected (with a $250,000 cash limit) – much higher than the £85,000 protection offered by the FSCS.

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. How easy is it to use the platform, is there a mobile app?
5. Do you have to pick all the investments, or are there ready-made portfolios?
6. Is there a cheap FX fee if you plan on buying international shares?
7. How reputable is the provider?
8. Does the platform offer good customer service?
9. 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 IBKR ISA a good choice?

The Interactive Brokers stocks and shares ISA is relatively new to the market, and with so many options already available – it needs to be top-tier to compete, and it does this successfully.

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

• Low trade costs, particularly for international stock commission and low FX conversion costs.
• The ability to use a family advisor account to manage and trade ISAs for the whole family from a single structure.
• Interest paid on idle cash balances.

It’s not the absolute cheapest ISA platform available to UK investors, but the fees from Interactive Brokers are extremely competitive across the board. It also boasts a well-established brand name and an investment choice other providers can’t match.

This is a DIY investment ISA. So you’ll need to manage your portfolio yourself, and the IBKR platform isn’t the sleekest, but you can invest on the web or through its mobile app. Interactive Brokers offer the option to carry out an ISA transfer for you, 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 Interactive Brokers 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 from IBKR.

Do Interactive Brokers offer a Lifetime ISA?

Unfortunately not. Right now, it just offers a stocks and shares ISA and a junior ISA (JISA).

Do Interactive Brokers offer a Cash ISA?

It doesn’t at the moment. However, you can earn interest on cash held within your stocks and shares ISA. You only have a £20,000 allowance to use between your accounts anyway, so you could still use your IBKR ISA to hold your investments and some cash.

Do Interactive Brokers offer an Innovative Finance ISA?

Not at the moment. Innovative Finance ISAs (IFISA) mainly concentrate on peer-to-peer lending (P2P), which isn’t something that Interactive Brokers currently offer.