Trading 212 Invest Vs ISA

Trading 212 Invest vs ISA

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Trading 212 ISA

**UPDATE 11/2/21** If you get put on a waiting list when you try and sign up, do not worry you will still get your free share! You can enter FMA3SCnL under the Promo Code options to claim your share. Even if you have already signed up before. **

Trading 212 Invest vs ISA. What are they and which one should you choose?

Firstly, if you are new to investing or are looking to open an account with Trading 212. You will notice they have both an Invest account and an ISA to choose from.

Check out my guide if you are new Trading 212 For Beginners will help you open an account and get started today.

I will detail the difference between a Trading 212 Invest vs ISA now.

First of all, an ISA is a tax-sheltered account. Meaning you put in after-tax money into a Trading 212 ISA. Any growth on your money in the form of capital gains or dividends you have received is 100% tax-free.

Once you decide to withdraw money from an ISA you will NOT pay tax on the withdrawals.

UPDATED* Trading 212 have now introduced a PIE Library. See dedicated post on PIES here.

Now I can share my PIEs here they are. Note this will only work on mobile for now. Click the link and the PIE will be displayed withing the Trading 212 App.

My PIEs are working well. They have been broken down into small PIES as discussed shortly. Click the PIE link on mobile to see the PIE inside the Trading 212 app.

Hopefully, we will soon be able to do the same on a desktop. At least, for now, it’s mobile-only.

ISA Example Scenario

For example, let’s say you deposit £1,000.

5 years later the stocks you selected have performed well and your money has grown to £30,000.

Meanwhile, you are getting dividends every quarter on top of this which you can choose to withdraw as cash or buy more shares. Reinvesting the dividends.

You are free to sell all your stocks and shares and bank the £30,000 completely tax-free!

Want a nice way to track your investments and dividends? Checkout my Dividend Tracking Spreadsheet

Do you want to get a free stock share worth up to £100?

Create a Trading 212 Invest account using this link www.trading212.com/invite/FMA3SCnL and we both get a free share! A free share to get you started on the Dividend Investing journey with me.

**UPDATE 11/2/21** If you get put on a waiting list when you try and sign up, do not worry you will still get your free share! You can enter FMA3SCnL under the Promo Code options to claim your share. Even if you have already signed up before. **

ISA Limitations

Trading 212 ISA limitations. It was all sounding too good to be true right?

The major downside to a stocks and shares ISA and most ISAs in general is you can only pay in £20,000 per year.

That is at least for the 2020 – 2021 tax year anyway.

This may go up or down in the future although likely only up.

Said ISA limit of £20,000 is the total amount you can deposit. For example, if you deposit £10,000 then withdraw it, then deposit the £10,000 again you will hit your ISA limit of £20,000.

This encourages you to keep the money in the ISA and allow it to compound.

Ideally, the money you deposit into a Trading 212 ISA should be left for at least 5 years but ideally 10+ years to let your money grow.

Up to date information on current ISA limits can be found here.

How Many Stocks And Shares Can I Open Per Year?

Most importantly you can only open and pay into one stocks and shares ISA per year.

Personally, I opened a stocks and shares ISA with Vanguard in August 2019. So, I had to wait until the new 2020/2021 tax year that started on April 6th 2020.

As of April 2020, I was able to open a new ISA and begin transferring my portfolio over into the tax-sheltered ISA.

I filmed the process so you can see how easy it is to open an ISA with Trading 212 – especially easy if like me you already had an invest account.

Trading 212 PIEs are now available for all of us.

Trading 212 Invest

A Trading 212 Invest account is what I started with. For the reason stated above, you are limited to opening one ISA and paying into one ISA per tax year.

In addition, if you max out your ISA limit of £20,000 and you still have plenty of money left over to invest before the new tax year rolls around.

Then you can open a Trading 212 Invest account and deposit the funds into here.

Be aware though that the Trading 212 Invest account is not tax sheltered.

In the UK we are allowed to earn £2,000 a year in dividend income tax-free (this is outside of the aforementioned ISA account).

If you exceed the £2,000 you will be taxed at your marginal tax rate.

The tax rates at the time of writing are as follows.

Tax bandTax rate on dividends over the allowance
Basic rate7.5%
Higher rate32.5%
Additional rate38.1%

Not only are you taxed on the dividends above the £2,000 allowance you will also be taxed on Capital Gains, known as CGT or Capital Gains Tax.

What Is The 2020-2021 Capital Gains Tax Allowance?

Currently, the allowance for Capital Gains currently stands at £12,300.

For the financial year, 2020-2021 before any tax is due.

This means outside of an ISA with a sizeable portfolio you will be hit with taxes that the ISA is exempt from.

However, with a Trading 212 Invest account, there is no limit to how much you can deposit.

In other words, if you have the capital then the ISA should be maxed every year before sending a single penny into the Trading 212 Invest account.

For up to date tax rates on dividend taxation see here. For capital gains allowance see here.

In conclusion, those are the main difference between the Trading 212 Invest vs ISA accounts.

Trading 212 Free Share

Do you want to get a free stock share worth up to £100?

Create a Trading 212 Invest account using this link www.trading212.com/invite/FMA3SCnL and we both get a free share!

You only need to deposit £1 to get started on your investing journey.

**UPDATE 11/2/21** If you get put on a waiting list when you try and sign up, do not worry you will still get your free share! You can enter FMA3SCnL under the Promo Code options to claim your share. Even if you have already signed up before. **

Read a little more about Trading 212 here.

Above all, you should always seek professional financial advice. Especially if you are exceeding ISA limitations and are potentially having to pay CGT once shares are sold. More information can be found on Capital Gains Tax here.

Thanks,

Sean C

21 thoughts on “Trading 212 Invest vs ISA”

  1. Hi,
    What happens if I’ve deposited £5000 into my invest account and now its worth £10000. I havent already got an isa so could I in theory transfer it to an isa on 212 and then withdraw it tax free?
    George!

    Reply

  2. Hello,

    I gave a silly question. I am not sure if I understood the taxes.

    I don’t pay taxes if I get 2000£ in dividends no matter how much I earn from my job? Same if I am selling my stocks that value less than 12000£/ year?

    Reply

    • Correct. You can earn £2000 a year in dividends tax-free. £12,000 in capital gains. You should be using an ISA first though so its all tax-free. If you are hitting the ISA limit of £20,000 and then wanting to sell stocks with a capital gain of more than £12,000 I would get some advice from an account though.

      Reply

  3. This information has been useful. But I wanted to know further. I use my invest account to day trade, I buy and sell shares on the day when it goes up. So for example if I deposited 5000k and then by day trading I turned this into 12k (within the tax year) and withdrawed this, would I need to pay tax or would this be tax free?

    Reply

    • You would need to pay tax on any capital gains over the currently allowed £12,000 yes. Turning 5,000 into 12,000 is a gain of 7,000. If you turned 5,000 into 17,000 then capital gains tax would need to be paid. If you are doing this then one, fair play. Two I would get professional advice. I’m not certain on all the technicalities but capital losses can be used to offset your gains to my knowledge. Unless you are only winning with your day trading, that I highly doubt haha.

      Thanks,
      Sean

      Reply

  6. hi
    ive made made enough money to be taxable on my invest account however can i sell some of my stocks and move it to isa slowly ie invest portfolio worth 17k i can withdraw 7k and the deposit it to my isa

    Reply

    • I’m not 100% but as long as you only “realise” less than the current £12,300 limit for the year you should be fine. I would double-check to be sure. As far as I understand it though you are correct. You could sell £12,299 and pay no CGT. The next financial year you could sell more up to £12,299 again. April is only around the corner! Nice position to be in either way! I assume you have already maxed your ISA allowance if you have so much invested in you INVEST account?

      Reply

  7. Hello Sean,

    Hope you are well.
    Quick question, I have got a trading 212 ISA account. I have invested £20k in this tax year. I have bought shares for just one company. Is it possible to sell shares ( when the prices are high) for the same company and buy again (when the prices are low) on a daily basis and in the same tax year. I would be grateful if you could clarify this please.
    Cheers

    Reply

    • Hi Vab,

      Yeah, this is what “day traders” do, it can be done on a daily basis if you choose. However, I would be very careful as doing what you suggest and timing the market is not easy. If it where we would all be millionaires in a very short time period.
      There is a famous quote that goes “time in the market, beats timing the market” the majority of people lose money doing it. It sounds easy in principle, buy low, sell high. Actually pulling it off is a different matter! Thanks

      Reply

  8. Does 212 allow you to open a new ISA account in each new tax year? Eg, have an isa account for year 20/21. Then a second account for 21/22? Thanks

    Reply

    • I do not believe so. What would be the purpose of doing that anyway? Your current £20,000 limit is reset each year in April. You can continue adding to your ISA over the year again up to £20,000.

      Reply

      • I was wondering the same – eg have the 20k with freetrade and leave it there, then open a new one to invest up to 20k in trading 21 2 – but not invest any further in the freetrade one….. Do dividends that are re-invested in the freetrade account count towards the new allowance, and if so, won’t that affect my trading 2 1 2 account as I am not supposed to have 2 ISA’s?

        Reply

        • Dividends and reinvested dividends along with capital growth are not included in your 20k limit. It is 20k limit per year by the way. So if you have maxed your Trading 212 ISA with 20k deposited then it resets in April, there is no need to start a separate freetrade one unless you want to. You can have two ISA but you can only contribute to one stocks and shares ISA per year.

          If you still have more capital to invest after the 20k limit then you can use the Invest account on Trading 212. Currently, the capital gains allowance is £12,300 per year. A problem most of use will not have to worry about! Maxing your ISA each year is a massive achievement in the first place, so well done if you have!

          Reply

  9. Hi,

    Apologies if this is a novice question.
    I have investments in a pie and one of them is not doing as well so I wish to sell it – I cannot just sell that one and there is a min amount I have to sell to rebalance the pie

    So eg if I sell £100 – does that go towards the 20k allowance if I re-invest it in my isa – not pie specific one?
    Thanks

    Reply

    • Hi Rob,

      If you go into your Pie and select Invest/Withdraw funds – Then Withdraw you can then withdraw (select Custom 100% on the stock you wish to sell). This will sell only that stock and will place the funds back into your “free funds” outside of the PIE.

      As long as it stays within the ISA on Trading 212 it will not count towards your ISA limit. That would only happen if you withdraw to your bank then deposited again.

      I hope that makes sense? I think thats what you was after! Let me know if you need any more help.

      Thanks,
      Sean

      Reply

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