Trading212 ISA vs Invest

Have you ever wanted to know the difference between the Trading212 ISA vs Invest account?

Trading212 is a super user friendly UK broker which offer 3 types of accounts, CFD, Invest & ISA.

While the Invest & ISA account is used for investing, the CFD account is used for trading, but today we shall focus on the Trading212 ISA vs Invest accounts. For long term investing the Invest & ISA account suits best, but what is the difference? Well first we need to understand each type of account.

What is the Trading212 Invest account?

The Trading212 Invest account is otherly known as a General Invest Account (GIA).

This is known as a standard account which allows you to buy and sell equities without the use of leverage. Using the Invest account you will be able to trade fractional shares of companies.

The Invest account is not a tax sheltered account which means you may have to pay tax if you exceed the years allowances. These allowances can change tax year to tax year. Keeping an eye on these is advised but these allowances are also rather generous.

Tax allowances for 2021:

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  • Capital Gains Tax (CGT) £12,300
  • Dividend £2,000

This means you can earn £12,300 before having to pay any tax on realised gains or you can receive up to £2,000 in dividends before having to report to the HMRC.CGT and Dividend tax.

What is the Trading212 ISA account?

The Trading212 ISA account is very similar to the Invest account, in terms that it also allows you to buy and sell equities, also in volumes of fractional shares of companies.

The main benefit of the Trading212 ISA is that its a tax sheltered account making it tax wise, more efficient. What it means by tax sheltered is that you don’t have to worry about the CGT or Dividend allowance when investing.

The one cavate to the ISA account is the £20,000 a year allowance. In one tax year you are only allowed to invest/save up to £20,000 across all ISA accounts.

This means if you save £5,000 into a Cash ISA and £15,000 into the Stocks & Shares ISA you would have maxed out your allowance.

Comparison.

Lets compare the Trading212 ISA vs Invest account.

There is virtually no difference when it comes to fees with the Trading212 ISA account versus the Invest account. Both allow commission free investing. The difference comes when we compare the actual account types, the ISA and the invest account (GIA).

General Invest Account (GIA)

Pros:

  • No annual limit, can invest as much as you like.
  • You have a £2,000 dividend allowance.*
  • You have a £12,300 CGT allowance.* **

Cons:

  • You pay tax on investments when you go above the allowances.
  • GIA accounts count as part of your estate, thinking about inheritance tax.

Individual Savings Account (ISA)

Pros:

  • Protection from dividend tax
  • Protection from Capital Gains Tax (CGT)
  • When you die, a spouse/civil partner can inherit your ISA

Cons:

  • A yearly £20,000 allowance for depositing into ISA accounts*
  • ISA can form part of your estate if inherited to anyone other than spouse or civil partner.

*Allowances correct for the year 2022

** The CGT allowance also includes other assets

 

ISA is a tax efficient shelter.

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Can you withdraw from the Trading212 ISA?

Short answer is yes. You can withdraw from the ISA, just the same as with the Trading212 Invest account. Though this comes with a cavate that, though you can withdraw without losing any tax benefits, it may affect you in the long run.

As stated earlier, you have a £20,000 ISA allowance, you can quickly run out of allowance if you decide to make a deposit, withdraw it and then deposit it again.

For example:

You deposit £10,000 into your Trading212 ISA, this means you have used up £10,000 out of your £20,000 allowance. You then decide to withdraw £5,000 from the ISA.

Later in the year you decide to deposit that £5,000 you withdrew back into the ISA.

Problem here is that you have now used up £15,000 of your ISA allowance with only £10,000 inside your ISA wrapper. This only leaves you with £5,000 of the allowance left.

The moral of the story is to only invest/deposit money that you don’t need short term.

Compare this to the Trading212 Invest account, you are able to deposit and withdraw freely with no deposit allowance to worry about, only the CGT & Dividend tax allowance.

So when it comes to depositing into a Trading212 ISA vs Invest, careful consideration must be made about

Which is better? Trading212 ISA vs Invest.

These accounts on the surface are virtually identical, the only difference between the Trading212 ISA vs Invest account is that the ISA is a tax advantaged account.

If you DON’T have a Stocks and Shares ISA already, then opening the Trading212 ISA makes sense, taking advantage of the tax benefits which the account offers.

If you DO already have a Stocks and Shares ISA then the Invest account is best. This is because you are only allowed to pay into one of each type of ISA each tax year.

While we have said these accounts are virtually identical, the ISA wins by far due to the tax efficiency of the account. Especially with the goal of long term investing in mind. Protecting those potential long term gains from stocks held is key to building wealth.

So to summaries it, the question of ‘Trading212 ISA vs Invest’, the ISA comes out ahead.

Keep in mind that not many people will exceed both their ISA allowance and CGT allowance in a tax year. If you do exceed both allowances, then lucky you.

Check out the Gov website to learn more about ISA accounts:

https://www.gov.uk/individual-savings-accounts/how-isas-work

Wish to discuss further with other investors? Click the button to go to the Sensible Investors Forum.

Trading212 ISA vs Invest discussion

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