Trading 212 Invest vs ISA

Trading 212 ISA

Trading 212 Invest vs ISA. What are they are 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 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 share 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.

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.

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 can also only open and pay into one stocks and shares ISA per year.

Personally, I opened 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.

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

9 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!

  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?

    1. 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.

  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?

    1. 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

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