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FinanceWhat Is the Best ISA? A Comparison of 7 Providers

What Is the Best ISA? A Comparison of 7 Providers

Disclaimer! This post may contain affiliate links

One of the best ways to save in the UK is to put money aside in an Individual Savings Account (ISA, for short). These accounts permit residents of the UK or those serving the Crown abroad to save £20,000 per year tax-free. No matter what you invest in, you get to keep 100% of the profits when you sell or withdraw. There isn’t another savings opportunity quite like it! Every person should have one. The question for customers is: what is the best ISA?

To answer that, let’s quickly review what ISAs are and then we’ll get into the top seven providers!

What Are ISAs?

ISAs are ways that the government encourages saving by providing a mechanism to grow money tax-free. You put your money in the account, and, no matter what it does, any gains you make, the interest you earn, or dividends you receive are entirely tax-free. When saving, you should always put your money first into an ISA, and then anything leftover can go to other taxable accounts.

There are four types of ISAs:

  • cash
  • stocks and shares
  • innovative finance
  • lifetime

As you might imagine, cash ISAs only let people deposit cash, earn interest, and withdraw money. Stocks and shares ISAs let people invest in equities. Innovative finance ISAs let people invest in P2P lending. Finally, lifetime ISAs let UK residents save for a house (including extra money from the government!).

Most people will choose either the cash ISA or the stocks and shares one. We’ve written a helpful cash ISA vs. stocks and shares ISA blog post to help you figure out which one is right for you.

With a basic understanding of what ISAs are and what they do, let’s start analyzing the providers.

Is Trading 212 the Best ISA Provider?

We’ve covered this brokerage in the past with our Trading 212 review. At that time, we said that Trading 212 “is a great option for those who are both experienced and new to trading and investing.” That statement most definitely applies to their ISA offering!

Trading 212 offers an ISA account with no administration charges, no commissions, and no costs to reinvest dividends. Additionally, they let people invest in fractional shares, and they even have an intelligent auto-investing platform that enables you to select a group of shares for your portfolio. The system can automatically invest any deposits you make or dividends you receive in this portfolio.

Few platforms are as robust as Trading 212 is. Plus, the app is both professional and gorgeous. If you’re interested, Trading 212 even offers free stock up to £100 when you sign up via our link.

If you’re thinking about getting an ISA, Trading 212 is worth considering

Trading 212 Referral Code: 4K6dTjp

Freetrade ISA

Freetrade is another very popular brokerage. It was the winner of the 2020 British Bank Awards, which shows you how well-designed this platform is. Like all the others on this list, they offer stocks and shares ISAs!

There’s a lot to love about Freetrade’s offering. Trades are free, and there’s only a £3 ISA account fee per month. Compared with some of the other offerings, this is relatively inexpensive. Furthermore, investors can trade fractional shares with Freetrade, and the exchange rate is the spot rate + 0.45%. If you want to invest in foreign stocks, like those on the NASDAQ or NYSE, that’s one of the best exchange rates you’ll find in the business.

Freetrade also has a free stock promotion enabling you to get up to £200. With all its features, Freetrade is one of the best ISA offerings!

Orca ISA

Orca is a relatively new brokerage. It launched at the end of 2020 and has one of the best-designed apps in this category. Few apps look as lovely or as polished as Orca’s. From the website registration process to trading within the app, the entire experience has some of the best graphical design of any brokerage.

Orca has a different fee structure than some other offerings, primarily because it is a newcomer to this space. Opening an ISA account is free with no monthly fee but you’ll pay £1 per £1,000 in trade value. So, if you execute a trade for £50, that will cost you £1. A £1,500 buy or sell of a stock will cost £2. If you’re selling £20,000 worth, the trade will cost £20.

While this might not sound like a lot, given that many people save in ISAs for the long-haul, these fees can add up. If you’re looking to save £100 a week, for example, you’ll pay £1 for every trade you make (£52 per year). Then, assuming your stocks do reasonably well, in 5-10 years, you might have £50,000 in value, which will cost you £50 to sell.

However, the ease of use and the quality app provided can make up for this, depending on what you want out of your ISA.

Orca does have a free share promotion of up to £200, so if you do want to try this newcomer.

Orca Referral Code: BVCVG

Hargreaves Lansdown: Does this Big Brokerage Provide the Best ISA?

Hargreaves Lansdown is one of the most recognizable brokerages in the nation. With numerous investors, you would think that Hargreaves Lansdown would provide one of the better offerings. However, as we will see, it doesn’t.

The experience provided by HL is not bad by any means. The app is pleasant and professional. You can see live share prices, trade shares from Europe, the US, and Canada. And, you can watch your favourite stocks.

Hargreaves Lansdown‘s problem is the cost. This brokerage charges 0.45% (capped at £45 per year) of your shares’ value. So, if you have £1,000 invested, you’ll pay £4.50 annually. With just £10,000, you’ll hit the £45 mark. On top of that, there are charges per deal. If you do 0-9 transactions, the cost per deal is £11.95. With 10-19, the price goes down to £8.95. Only once you hit 20+ transactions will you get the lowest price of £5.95.

The other offerings on this list, like Freetrade and Trading 212, charge nothing for transactions and either has no monthly fee or a minimal one. Given the abundance of ISA options, it’s hard to recommend Hargreaves Lansdown, even if it is one of the more prominent brokerages here in the UK!

Plum

Plum is a fascinating brokerage because it does not permit trading individual stocks. Instead, they only let you invest in pre-selected funds. The idea behind Plum is that it is a simplified approach to investing. You don’t pick individual stocks, which can be risky. These curated funds spread out the risk over multiple companies. All you need to do is pick the funds you want and how you want to make the investments (per paycheque, roundups, and more).

One of the nice things about the fund selections is that they target almost any industry. There are tech funds, clean and green funds, funds that comprise rising Asian companies, funds that invest in health care, and so many more.

All in all, if you want a set-it-and-forget-it approach to ISA investing, Plum is one of the best options!

Nutmeg

Based in London, Nutmeg is another brokerage that strives to make ISA investing as simple as possible. Except, unlike Plum, Nutmeg restricts your options even further. Instead of investing in individual funds, you select an “investment style,” each of which Nutmeg manages (except for Smart Alpha which J.P. Morgan Asset Management manages).

There are four total investment styles: Fully Managed, Smart Alpha, Socially Responsible, and Fixed Allocation. Nutmeg’s in-house investment team has built these portfolios. As such, they can offer relatively low fees. With £5,000 invested, the costs add up to be approximately £0.72 per week. Those fees can escalate quickly, though. With £100,000 invested, you’ll be looking at £14.38 per week or £747.76 annually.

If you want a hands-off approach to investing, Nutmeg is one of the best ISA platforms. Indeed, it’s about as hands-off as you can get! You don’t need to pick any funds or stocks.

Vanguard

Vanguard, one of the largest companies in the investing space, offers a Stocks and Shares ISA. There are a few key benefits to this ISA offering.

First, Vanguard only offers funds, ETFs, and LifeStrategy funds. So, like the previous two provided ISA providers, you won’t be able to trade individual stocks in this account. However, you will have access to over 70 funds. As such, you can pick from many choices.

Vanguard is famous for having low fees, and they deliver here too. The account fee is just 0.15% per year. There are no other fees, so you won’t have to pay to deal, switch holdings, make payments, or exit a position. Furthermore, you can invest with as little as £100 per month or add a lump sum from £500.

The financial gurus at Vanguard have created portfolios from which you can choose. Or, if you prefer, you can select one of the 70+ funds. The choice is yours!

Ultimately, Vanguard is a good choice for an ISA. Is it the best ISA? Maybe not the best, but worth exploring.

The Best ISA Is Different for Everyone

No matter what you’re looking for in an ISA, there’s something out there for everyone. For those looking to trade stocks, Freetrade or Trading 212 are probably your best bets. Orca comes in a close third. If you’re looking for something more hands-off, you might want to consider Plum or Vanguard. And, if you’re looking for something genuinely set-it-and-forget-it, Nutmeg is the way to go!

While none of these are the best ISA for everyone, each company has the best ISA for someone. The main thing is to start investing! Take advantage of tax-free investments and savings to build your net worth and achieve your financial dreams!

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