Freetrade*, an app that specialises in trading stocks and shares for free, has announced that its Stocks & Shares ISA is now 'flexible'. It means that Freetrade users can now withdraw money from their ISA and return it within the same tax year without losing part of their tax-free allowance. The change came into effect on 11th July 2024 and has been rolled out across all Feetrade ISAs, meaning existing users do not need to do anything to add the feature. This article explains how a flexible ISA works and provides more details on how the change impacts existing Freetrade customers.
What is a flexible ISA?
An Individual Savings Account or 'ISA' as it is better known, is a type of savings account that allows you to save and/or invest up to £20,000 per tax year, without paying any income or capital gains tax as your ISA pot grows. The £20,000 ISA allowance resets on the 6th April each year and any leftover allowance cannot be carried over.
A flexible ISA has the added benefit that, should you need to withdraw some of the money in your existing ISA, you can redeposit the money before the tax year ends without using any more of your ISA allowance. This benefit provides flexibility, giving savers access to their money should they need it and ensuring they aren't penalised should they return the money within the same tax year.
Conversely, if an investor needed to temporarily withdraw say £5,000 from a non-flexible ISA, then replaced it in the same tax year, they would lose £5,000 from that year's ISA allowance. We explain flexible ISAs in more detail, including which providers offer flexible ISAs in our article 'What is a flexible ISA?'.
Flexible ISA vs Non-flexible ISA
Below, we provide an example of how a flexible ISA works compared to a non-flexible ISA.
| Flexible ISA | Non-flexible ISA | |
| Deposits | £20,000 | £20,000 |
| Withdrawals | £5,000 | £5,000 |
| ISA total | £15,000 | £15,000 |
| Remaining annual allowance | £5,000* | £0 |
*Can only be returned to the same flexible ISA it was withdrawn from
Freetrade ISA withdrawals prior to 11th July 2024
Freetrade ISA withdrawals prior to 11th July 2024 will not be counted as 'flexible'. Freetrade explains as follows: "The Freetrade ISA became flexible on 11 July 2024. If you withdrew money from your ISA between the start of the tax year (6 April 2024) and this date, your withdrawals won’t retroactively be reflected on your annual allowance. As the ISA wasn’t flexible during this time, you won’t be able to return that cash".
Can I withdraw money from my Freetrade ISA and add it to a flexible ISA with another provider?
No. Freetrade states that 'Flexible withdrawals can only go back into your Freetrade ISA - not another ISA, even if that ISA is also flexible'.
Is a Freetrade ISA worth considering?
Freetrade offers three types of investment account. Its basic account is free, however, users can only save and invest via a general investment account. Those looking to save and invest via a Freetrade ISA* would need to take out a standard account, costing £5.99 per month or £59.88 per year. Investors can access over 6,200 stocks and ETFs and the account currently pays 3% AER on up to £3,000 of uninvested cash.
Additionally, Money to the Masses readers can receive a FREE SHARE worth up to £100* when they deposit at least £50 into a Freetrade ISA (capital at risk) or Freetrade basic account (capital at risk). For more information about Fretrade, including how its app works and how it compares to the likes of Trading 212 and Moneybox, check out our independent Freetrade review.
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