Freetrade launches versatile shares and shares Isa

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

FreeTrade* launched the flexible feature to allow investors to withdraw and replace money without impacting their annual Isa allowance, so long as it is put back in the same tax year. 

Flexibility is a useful tax-beating feature to have, allowing savers and investors to dip into funds and pay them back without losing allowance – and is more commonly found in cash Isas. 

Flexible friend: Freetrade has launched the ability to withdraw and replace funds from a stocks and shares Isa without impacting the annual allowance

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

But an investor withdrawing £5,000 from a flexible stocks and shares Isa would still be able to keep every penny of their £20,000 Isa allowance, so long as they replaced the £5,000 they withdrew within the same tax year.

Viktor Nebehaj, CEO of Freetrade, said: ‘Life is unpredictable and large expenses often can creep up on us. With a flexible Isa, we’re giving our customers the opportunity to meet these short-term needs, while not sacrificing the long-term benefits of the Isa allowance.’ 

Of course, with a stocks and shares Isa, investors would be wise not to dip in and out of their pots frequently. After all, a key element of investing in the stock market is to leave your money invested so it can grow and compound over the long term.

But a flexible Isa means investors can keep funds invested that they may need to draw on but then be able to replace.

A flexible stocks and shares Isa gives the ability to withdraw funds for big one-off purchases, or major payments – for example a home deposit, property renovations, a big holiday, or school fees – and then replace them in the same tax year.

This is Money’s Simon Lambert is a fan of flexible Isas and argues that more savers and investors should consider the feature and more banks, building societies and investment platforms should offer flexibility. 

Not many investment platforms offer flexible stocks and shares Isas, with big guns Hargreaves Lansdown*, Interactive Investor* and AJ Bell* failing to do so. But new Isa rules mean investors can now open more than one of the same type of Isa.

How does Freetrade’s Isa compare? 

Freetrade* has fee-free share dealing and offers UK, European and US shares, ETFs and some investment trusts but not investment funds. Freetrade’s Basic plan has no account charges, but those who want a stocks and shares Isa must take its £5.99 per month Standard plan. The Plus account is £11.99 per month, which investors need if they want a Sipp

Rival Trading 212* also offers a flexible Isa with fee-free share dealing but carries no account charge for its stocks and shares Isa. While it has shares, ETFs and investment trusts, like Freetrade it does not offer funds.

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

Bestinvest* also has a flexible Isa and offers shares, ETFs, investment trusts and funds with a 0.4 per cent account charge cut to 0.2 per cent for its ready-made investment portfolios. Fund dealing is free and share dealing costs £4.95.

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

The rise of the flexible Isa

Freetrade said that it saw significant demand for flexibility in a stocks and shares Isa.

Flexible cash Isas have been rising in popularity in the cash Isa market. Some of the best easy acccess cash Isas at the moment are flexible, for example Plum’s* 5.17 per cent deal (this rate drops after four withdrawals), Chip’s* 5.1 per cent cash Isa and Zopa’s 5.08 per cent cash Isa.

A flexible Isa is more important than ever at a time when savers are facing a £10.4billion tax bill on their savings interest.

When rates were low, interest on savings accounts was so pitiful that the personal savings allowance offered the protection most people needed against tax on their interest.

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

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

Meanwhile, if you pay 45p tax, you get no personal savings allowance at all.