Closed my ISA - thoughts?

đź“Š Investing
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By closing my ISA, I mean I will no longer be investing inside the ISA wrapper.

(I might use the account as a regular checking/savings.)

Main reason: FX fee once for buying & again for selling US shares.

Secondary reason: T212 has become less and less useful to me (due to the changes of the platform).

Kept a log for the last 2 weeks.
In the last 2 weeks I would’ve made a little over twice the profit, had FX not been a factor / had my account been in USD instead of GBP.

I’m now going to invest with a US broker into an account based in US Dollars.

I could be wrong - this is why I’m testing this for a year - but I believe even after the tax I’ll probably have a higher P/L trading outside the ISA, than inside it with FX fees.

(And the benefits of switching make it a no brainer. Otherwise, I would’ve used T212’s CFD or Invest accounts.)

Reasons for switching & some things T212 could improve on:
(some of the below are available in the Invest or CFD account types)

Benefit #1 - no FX fee

Benefit #2 - better platform & reporting

Benefit #3 - can both long and short

Benefit #4 - see the actual tax I’ll pay on my gains (rather than running hypothetical scenarios) and see how it compares

Benefit #5 - pre/after market hour fills

Benefit #6 - more order types (e.g. market on close, trailing)

Benefit #7 - has their own charting/trading software

Benefit #8 - can exchange GBP into USD free of charge

Benefit #9 - can pick and choose when to convert back to GBP & withdraw funds

Benefit #10 - faster executions

Benefit #11 - less slippage

Benefit #12 - price improvements

Benefit #13 - can trade options

Benefit #14 - margin

Your thoughts/experiences are welcome.
:victory_hand:

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One key theme in your list of reasons to move away from T212 ISA seems to be either FX Fees or aspects that are influenced by FX Charges.

I may be wrong but for someone to hold an ISA account, investments can be in any currency as long as the base currency is ÂŁ ; ISA is a UK specific tax free vehicle.

Therefore FX fees (and FX Charges) for both buying and selling unfortunately remains a reason not to (or limit ones investment) in non UK shares. There is a lot of money to be made on FX Charges from your returns though, either at the time of paying-in or taking away. Although it depends on the timing when you buy r sell your stock and the position of ÂŁ compared to $ at that time.

But yes if you tend to invest more and more frequently in US (lets call it non UK stocks) you cannot avoid FX fees each time you buy or sell.

Important to note that keeping this issue of ÂŁ as base currency away, T212 has some of the lowest FX Fees in the market when I had last reviewed.

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Correct, you can invest in any of the qualifying equities regarless whether they trade in GBP, USD, EUR, etc.

Totally agree.

My thing is that I wish to take on all/most of the setups I like, without having to wait for USD/GBP EUR/GBP to move one way or the other. And unfortunately if you convert to USD when USDGBP is high and convert back to GBP when the rate is lower, just converting the currencies costs you alone.

Essentially, I wish to keep things simple, take as many opportunities as I can, and not have to wait weeks & months for USDGBP to look like it’ll rally and fall, and stabalise, etc.

I want my trades to be independant of that - which of course inside of the ISA wrapper is not possible, unless you only buy/sell equities trading in GBP (or GBX actually).

They could have the lowest rates in the world.

Frequent opening and closing of positions + larger quantities, will eat away at your profits considerably.

Regardless, I wish to have a better understanding of returns uncumbered by FX conversions and taxed by HMRC - to then decide which avenue’s best.

With each new update, T212 seems to become more and more annoying to use. And I don’t need those kind of problems.

I’d rather go live in an already built city that’s continuously expanding than a city that’s just starting and is trying to figure out the best structure.

4

I posted about this a little while back.

Just last month I paid over ÂŁ500 in FX fees alone.

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And I only took about half the trades I wanted to take.

So If I’m down 1k every month just by buying & selling shares, I might aswell try the USD/taxes route and see where it takes me.

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Absolutely agree on the killer FX charges since the past couple of months. I have not see so much variation over the past couple of years but this is a one off period. Blame it on Trump’s tariffs and his daily evening impromptus press conferences :grinning_face: . Four in five days the stocks recover through the day only to sink again during and after these conferences not always due to price but due to dollar swings. The ISA accounts get hit because unlike Investing or CFD accounts they take the FX hit. I believe these will eventually settle as and when the tariffs do, not sure by when though.

Over the past month and a half, I have had to give away over 50% of my profits to FX charges… Audacious!

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I don’t see 0.15% fx fee on a buy and sell being a big deal, unless you are trading points.

If it were me I would modify my due diligence process when appointing my broker.

This site might help - you input the value you trade each month and it creates a comparison of costs on different brokers.

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I’ve decided on my immediate course of action.
I will shelf the ISA account for now. (for ever?)

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Benefit 1 - how would you want 212 to charge users then? For long term investors, adding a platform fee above fx fees could be far more expensive.

Benefit 4 - no platform can do this really as they can’t for example see the losses you have made on other platforms that you can use to offset taxable gains. They also do provide an annual report detailing what you need to calculate this yourself.

Benefit 8 is a repeat of 1.
Benefit 9 - we already have this.

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I agree, if they were to scrap FX fees and use platform fees instead, those fees would by default be higher than the FX fees, otherwise it wouldn’t work for them as a business (or they’d need to compensate elsewhere).

All I’m saying is that my new, non-ISA account is in USD, therefore eradicating FX impact altogether. Not saying T212 needs to do this, if they would and could without costing users (and themselves) it’d obviously be amazing. But again, don’t see this happening any time soon.

All things aside, it’s much more benefitial for me to work in USD than factor in the continously endless FX impact (which of course can also work in my favour too). There’s fewer factors. Profit is $500, account increases by $500. Much simpler than: this is when you bought, this was the conversion rate then, this is the conversion rate now at the time of liquidation, therefore x amount will be added or deducted to your account, etc. It’s just messier: one more component, one more thing to consider at the time of purchase & sale of shares.

Yes, absolutely, I wouldn’t want them to do this regardless.

Just wanted to point out that I wish to log a year’s worth of trades without FX impact + capital gains tax and see where that gets me - as supposed to creating hypothetical scenarios (and calculations) in excel where I fiddle with fictional numbers and conclude with an imperfect understanding of whether stick to ISA or switch to non-ISA.

I’d rather work with real numbers, real trades. Then be able to conclude which avenue deducts less from the bottom line.

Correct. (There is a slight difference in my head but I can’t seem to explain it at all right now.)

Not available in the ISA account - as far as I’m aware.

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I guess the difference is in timing.

#1 is mandatory if you wish to trade a USD stock - you have to incur/be credited x amount - there’s no way around it.

#8 - I meant it more as in you get to pick when to convert into USD and when to convert back. You can be strategic about it. Whereas for #1, you’ll have to exchange now, otherwise, there’s no purchase/sale.

So I guess #8 and #9 are essentially identical.

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Again 212 already offer you to choose settlement currency in a GIA. It is an ISA where cash must be held in GBP, so you must do the FX at point of purchase and sale. ISAs are a long term tax efficient wrapper for holding investments and the rules are set by HMRC.

It sounds like you are also inter mixing fx rate movements/volatility with fees.

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I agree.

My bad too, I should have defined the two terms I used upfront to avoid confusion in my response. I see FX Fees as the amount T212 charges to assist you with the currency conversion, this is fixed. FX Charge is what one gains or loses as part of this conversion based on the ÂŁ / $ spot rate, this is variable and has been jittery recently.

@Vio if you analyse your case based on the above two, I am sure you would find it is not T212 but the conversion rates that is paying havoc with ISA investments (non UK stocks).

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If you can, in your case, you may avoid trading with Non UK stocks within your ISA until the tariff dust gets settled. What is making it worst is that this time currencies on both sides are wavering making it difficult to estimate where you will stand post buying or selling.

Here is an example …

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I think we’re on the same page. ISAs work in GBP - you can only hold GBP and not in USD, making FX impact an obligation in order to trade non GBX equities.

Possibly. But T212’s platform & fees are bad enough to not be appealing for any other reason than their ISA accounts.

I’m not particularly interested who’s at fault, T212 or the ISA wrapper itself - more focused on capturing and keeping as much of my profit as possible and losing as little as possible on expenses, fees, commissions, FX, etc.

That’s why I wish to trade outside an ISA account and see the result/difference. It also depends on how you invest, durations, quantities, etc. but I think it’s a good experiment at the least to see what the difference is, and what portfolio growth difference there is.

Definitely don’t like loosing 1/3 or 2/3 (sometimes more) even though I’m in profit with my trade but the FX impact is a large.

I wish I had kept a log from before the tariff war but I’ve experienced these types of scenarios before recent tariff events.

Again, I’d like to simplify things so as not to have 100 factors eat away at my p/l but rather know x profit means that same x amount captured - not lose a huge chunk of it because of any endogenous or exogenous events (outside of company & market related which I factor in).

The fees/commissions I’m paying on the other platform are miniscule - especially compared to just the FX impact in my ISA alone. Now I want to see how much the tax at end of financial year deducts from profits. Then I’ll have a clearer idea as to whethere the constant nibbling or one deduction at year end affects my bottom line less (currently I’m leaning towards the latter, but I could be wrong - that’s why I wish to test this out for real).

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There is only one fee, and it’s 0.15% for FX conversion, which is already one of the lowest of any option. I am unsure what your frame of reference for comparison is to call it “bad”.

FX fluctuations will always be there when investing in foreign companies. Even if you were to buy GBP denominated shares of foreign companies, your actual return will still bear these fluctuations - after all, if they earn their profits in dollar, but the dollar is worth less, you still earn less. It is but a fact of life.

Some investment funds, mainly index funds, will offer currency-hedged vehicles, which allows you to capture their USD returns.
Doing a similar thing on an individual stock basis is a rather complex and costly process, which also uses a significant portion of your capital that isn’t invested. It generally is not worth the trouble.

While trading outside of an ISA would allow you to hold a USD account for example, where your displayed return would be higher when computed in USD, your actual real return would still be subject to FX fluctuations. Again, if the dollar has halved in value against the pound, it matters little that your USD position is up 50% - you’re still losing.
The benefit still would be to not pay the 0.15% conversion fee of course.

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I’m just adding a quick summary of the two paths;

ISA

  • Investments in the stock and the currency are locked together. Selling a profit in the stock forces to use the current FX rate.
  • Every transaction results in a 0.15% fee.
  • No taxes.

non-ISA

  • Multi-currency accounts allows to separate the investment in the stock and the currency. Selling a profit in USD, and waiting for a more favourable FX rate.
  • Avoid excessive FX fee from multiple transactions in a foreign market.
  • Pays taxes.
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There are 2 things.

One is the the 0.15% FX conversion fee.

The other is how much GBP you get for the USD you sold.

I’ve asked ChatGPT to provide an example based on $5,000 profit:

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Same profit in USD - same FX fee charged (not shown in this analysis above) - different realised profit.

This latter fluctuation is what I’m referring to.

Also for me personally, the platform is going from bad to worse, so whilst they try to figure out how to build the platform, I’ll be elsewhere experimenting with this to see the difference in my bottom line.

I think being able to decide when to deposit & withdraw (convert to USD & convert back into GBP) is a good advantage to have. That choice is what I value. I won’t be withdrawing funds every other week so converting back into GBP will rarely happen. Which means I can be strategic about it. I can convert now my GBP into USD because the I get more USD for my GBP, and convert later my USD into GBP because I’ll get back more GBP than I initially converted.

I think it’s a great advantage to choose when, instead of having no choice but to convert to and back from right now, otherwise there’s no trade.

And if I can get a better fill, less spreadiness, less slippage, a better experience, more control, better reporting, etc. on another platform, why would I stay with T212 and switch to CFD or Invest when I can go elsewhere and get more of what I personally want?

Each to their own.

It’s a no-brainer for me - at least for the duration of one experimental year. Then assess and take it from there.

18

Now this is only one trade. You capture ÂŁ462 less on this one trade.

It’s huge as it is but what if you now have closed 10 trades? £4,620 lost just because.

100 trades = ÂŁ46,200 lost.

It’s not small change if you trade rarely, it’s definitely not small change if you trade often and big quantities.

19

Your opinion is indeed your own, and the choice is too of course.
I’d like to add a small side-note to that point though. The tax consideration is very consequent, especially when you consider the timing of the sell / FX sell to be important (which means you will have realized capital gains often, instead of a buy-and-hold for life in which case the FX timing is meaningless).

From my own personal experience, I’ve tracked FX fluctuations of my entire portfolio over the last 6 years, and they have ranged from -1,000€ to +1,000€, whilst my portfolio grew from <5k to now 75k. Currently standing at +400€, and the range of the last twelve months has been +200 to +850€.

From my perspective, they are pretty much inconsequential, and the tax burden you would rather choose seems like a pricey decision.

I’m only saying this to offer some more related information on the topic, not give any advice. Your mileage might vary heavily too.

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20

Your example is a tough one.
That active trading style means you will get the most impact from the taxes implications - as well as the FX ones.

Realistically though, one must also consider that the tax bill is guaranteed, the FX bill is not and could go either way. You could expect that half the time, it would be added gains even.

If you expect that you’ll sell all your trades when FX is at its worst, then yes, the tax is lesser.
But is it a fair and realistic assessment? Not a rhetorical question, truly an open ended question for your own assessment.