Freetrade launches flexible stocks and shares Isa

Investors can now get a flexible stocks and shares ISA from the Freetrade investment platform

FreeTrade* launched the flexible feature that allows investors to withdraw and replace money without affecting their annual ISA allowance, as long as they re-deposit it in the same tax year.

Flexibility is a useful tax-avoiding feature, allowing savers and investors to access and return funds without losing the deduction, and is most commonly found in cash ISAs.

If an investor needed to temporarily withdraw £5,000 from their stocks and securities ISA and was not flexible, they would lose £5,000 of that year’s ISA allowance when they replaced it.

But an investor who withdraws £5,000 from a flexible stocks and securities ISA could still keep every penny of their £20,000 ISA allowance, as long as they replace the £5,000 they withdrew within the same tax year.

Viktor Nebehaj, CEO of Freetrade, said: “Life is unpredictable and we are often faced with large expenses. With a Flexible ISA, we offer our clients the opportunity to meet these short-term needs, without sacrificing the long-term benefits of the ISA benefit.”

Of course, with a stocks and shares ISA, investors should avoid investing and withdrawing funds frequently. After all, a key element of stock market investing is leaving money invested so it can grow and generate profits over the long term.

But a flexible ISA means investors can keep funds invested that they may need to withdraw and then be able to replace them.

A flexible stocks and securities ISA gives you the ability to withdraw funds for large one-off purchases or major payments (for example, a house deposit, property renovations, a major holiday or school fees) and then replace them in the same tax year.

Simon Lambert of This is Money is an advocate of flexible ISAs and argues that more savers and investors should consider this feature and that more banks, building societies and investment platforms should offer flexibility.

Not many investment platforms offer flexible, big-gun stocks and shares ISAs Hargreaves Lansdown*, Interactive Investor* and AJ Bell* However, new ISA rules mean that investors can now open more than one ISA of the same type.

How does the Freetrade ISA compare?

Free trade* It was launched in 2018 and quickly built up a sizeable customer base thanks to its commission-free trading. The platform offers UK, European and US stocks, ETFs and some investment trusts, but does not offer mutual funds.

Freetrade’s Basic plan has no account fees, but those who want a stocks and shares ISA must sign up for the Standard plan at £5.99 per month. The Plus account costs £11.99 per month, which is what investors need if they want a Sipp.

Rival Trade 212* It also offers commission-free trading, but does not charge any account fees for its stocks and shares ISA. The Trading 212 ISA is not flexible and while it does have shares, ETFs and mutual funds, like Freetrade, it does not offer funds.

Charles Stanley Direct* It has a flexible stocks and shares ISA and allows investors to hold shares, ETFs, unit trusts and funds. It has a 0.35 per cent account charge, which is waived for shares if a trade is made that month. Funds trading is free, but it charges £11.95 to buy and sell shares.

Best investment* It also has a flexible ISA and offers shares, ETFs, unit trusts and funds with a 0.4 per cent account opening fee which drops to 0.2 per cent for its ready-made investment portfolios. Fund trading is free and share trading costs £4.95.

> Read our full guide: How to choose the best stocks and shares Isa

The rise of the flexible ISA

Freetrade said it saw significant demand for flexibility in a stocks and securities ISA.

Flexible ISA loans have gained popularity in the flexible ISA loan market. Some of the best easy-to-access flexible ISA loans right now are flexible, for example plums* Offer of 5.17 percent (this rate drops after four withdrawals), French fries* 5.1 percent in cash Isa and From Zopa 5.08 percent effective Isa.

A flexible ISA is more important than ever at a time when savers face a £10.4bn tax bill on the interest on their savings.

When rates were low, savings account interest was so paltry that the personal savings allowance offered the protection most people needed from taxes on their interest.

But with higher rates and the personal savings limit stuck at £1,000 for basic rate taxpayers and just £500 for higher rate taxpayers, it has become much easier to fall into the savings tax trap.

With a savings rate of 5 per cent, a basic rate taxpayer now needs just £20,000 in cash to overcome the allowance, while a higher rate taxpayer needs £10,000.

Meanwhile, if you pay 45p in tax, you don’t get any personal savings allowance.