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Trading 212: Invest or ISA

Trading 212 offers Invest and ISA accounts. Which should you use?

Trading 212 offers three types of accounts: CFD, Invest, and ISA. The latter two are what I use and recommend everyone else rely on, whilst CFD is where you can lose (or gain) large sums of money. But Invest and ISA are pretty similar, so which should you choose to use?

What’s an ISA?

An individual savings account (or ISA for short) is a form of savings, available to UK residents with favourable tax status. In the tax year of 2020-2021, you are able to save a total of £20,000 into an ISA, which can grow and compound interest. When withdrawing from your ISA, you do so without paying any tax, even if you somehow manage to amass a fortune.

There are numerous types of ISA available to the public, ranging from stocks and shares to help-to-buy. You can use an ISA to simply save money or to put away funds for real estate and trading. Trading 212 offers a stocks and shares ISA, allowing you to invest in stocks and enjoy tax-free withdrawals. The major drawback of an ISA is the deposit limit.

The £20,000 covers your ISA allowance as an individual, not a specific ISA account. That means if you already save £20,000 a year in an ISA with another provider, you cannot open a new one and start adding more funds. It’s a £20,000 limit across the board, not per ISA.

So, Invest or ISA?

Make sure you take advantage of your ISA allowance.

This brings us to Trading 212. The company offers both an Invest account for general investments, as well as stocks and shares ISA. Which should you use? It all depends on how much you already put into an ISA.

If you don’t currently have an ISA open, it may be worth using the ISA with Trading 212. This acts much like the Invest account, allowing you to deposit funds, purchase shares in companies, and compound dividend returns. The only difference is you’ll not have to pay tax should you sell shares and withdraw funds.

Invest can be handy to act as an overflow if you already pay a large sum into an ISA or few. It’s also not bound to an annual limit, allowing you to throw as much cash into your portfolio as desired.

Get a free stock today!

Trading 212 is a fantastic brokerage and investment app available to select European markets, including the UK. By signing up using the link below, you can get a free stock after you invest just £1!

By Rich Edmonds

Rich creates content for the top Windows-focused publication, but by night he tries to make his money work for him and rambles far too much here.

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