HMRC want to tax your ISA

HMRC have written to some of the most popular retail investing platforms to tell them that current legislation means fractional shares are not ok to hold in an ISA, and this is a big deal for anyone who holds fractional shares in an ISA.

HMRC want to change your stocks and shares ISA

So I decided to dig in and see what I could find and I have quickly put this blog together to try to work out what it means for normal people like you and I who, well, just want to invest and try to look after our futures. You know… the way the government have been asking us to all this time.

Why are fractional shares are important to retail investors?

A lot of good companies that people want to invest in are expensive.

Fractional shares allow retail investors to spread their money across a lot of shares to create a healthy diversity.

All your money doesn’t have to go in one place and suffer the risks of that. For example, a share in Apple will cost you about $180, give or take.

That means that unless you have $180 you can’t buy a full share of Apple. Microsoft sits at around $330

Fractional shares mean I can buy a little bit of Apple and Microsoft even when I don’t have enough for a whole share. Some of the modern apps like Trading 212 or InvestEngine will let you invest as little as £1 in a stocks and shares ISA. 

That’s great for anyone who wants to start investing and great for anyone who wants to continue drip-feeding funds into a stocks and shares ISA.

The advent of fractional shares has lowered the barrier for entry so low that just about anyone can start to invest in a tax free manner. 

Are tax free ISAs coming to an end?

All gains in an ISA, whether it’s stocks and shares or cash, are free from any taxation and of course, currently you can invest up to £20,000 a year (£9,000 for kids).

All gains of all descriptions are free from tax, so over the years you have the opportunity to build up a really nice pot… and fractional shares give you a lot of choices as to how to put that pot together. Every penny can be working for you if you want it to.

So why is HMRC taking aim at fractional shares?

Well, HMRC don’t reckon that fractional shares are allowed in an ISA.

It’s not that HMRC have an issue with fractional shares as a concept, it’s just they don’ think they are a valid asset to hold in an ISA specifically.

No trouble holding them in a general investing account where all the usual tax rules apply.

HM Revenue & Customs recently had a meeting with some of the industry’s leading lights and government officials, at which point they reiterated their stance that this type of investment could not be held within an ISA despite the protestation of various platforms disputing this particular interpretation.

Their problem goes back to a definition set out in 1998 of what can go in an ISA and to be honest, I’m not getting into that now, because I’m more interested in what it means for you and I if they are right, rather than whether they are or not, if you see what I mean. 

I’ll leave a link if you want to go and see the legislation for yourself – but I think mostly their trouble is that in some cases at least, a fractional share isn’t really a share from a company but rather an agreement between you and your investment platform to hold a portion of a portion… a derivative of a sort and thus doesn’t belong in an ISA… anyway….

What happens if HMRC get fractional shares banned from ISAs?

The short story here is that if HRMC get their way and it is decided that fractional shares can’t be in an ISA then it could force investors to sell out of any fractional positions, and then of course there would be a tax bill to pay, since these fractional shares shouldn’t have been held in a tax free wrapper in the first place.

That would be ugly to say the least, and potentially disastrous to anyone who has been planning their investing for any length of time. There would also be a ton of unknowns which I can only speculate on – would you be forced to sell the fractions? Could you consolidate into something else? Move to a cash ISA? 

It’s a very confusing time for investors – apart from anything else, the goalposts feel like they are being shifted for everyday investors like you and I.

Worlds collide

On one side of the coin HMRC are saying it’s not ok, on the other you’ve got three main groups as I see it. People like Jeremy Hunt – seeking ways to simplify ISAs and get more people investing. There are the platforms themselves who are offering these products and have done for years and of course the FCA who authorise and regulate these companies sitting alongside them. 

And that’s a weird one.

What does the regulator have to say about HMRC and fractional shares?

I can tell you having dealt with the FCA and their representatives before they are a tough nut to crack and I have to say that if there is suddenly real heart-ache for investors here because of fractional shares being offered by these platforms, why have the FCA given their approval to so many platforms for so long. If the FCA haven’t had a problem with fractional shares in an ISA but HMRC do, what are the public meant to think about what’s going on here? The FCA being the authority for all things financial product in the UK have, for so long now given their blessing and said ok to the idea of offering fractional shares being held in an ISA. 

As a consumer I look for proper regulation on anything because I want to know I’m being looked after, so I have to say seeing HMRC and the FCA on apparently opposite sides here is concerning.

Why is HMRC and fractional shares in the news now?

So. Why now? Why wait for so long before HMRC want to go public with this. 

Maybe it’s the rise of more and more investing apps.

Each new player on the market seems to offer fractional shares and maybe it’s just that now is the time to adapt the rules or get a discussion moving to modernize the legislation. I don’t know.

It’s worth noting the old guard and some of the more established providers like Vanguard or Hargreaves Lansdowne don’t offer fractional shares. I wonder have they known something all along.

Who will pay the bill if HMRC get their way on fractional shares?

In any case, if HRMC get their way, there will be a tax bill to pay.

So where would that leave you and I?

It’s interesting to see this quote from HMRC…

“Our longstanding view is that a fraction of a share cannot be held in an ISA. When an ISA manager allows investment in non-qualifying assets, we would seek to recover any tax loss from the ISA manager rather than the investor where possible”


So it looks like it’s the platforms that could potentially have a fairly hefty tax bill to pay rather than the man on the street if this one goes the distance.

I can’t imagine the top dogs of pretty much every modern investing platform are going to love that. I suppose the knock on effects could range from fractional shares being pulled from the platforms or even.

Is my platform going to make changes because of HMRC’s interest in fractional shares?

There is even a risk here that platforms will introduce more ways to recover that bill from their customers – maybe in terms of more fees… some will just pack up and go away, or find they don’t have the funds to pay and simply go under. Again this is all speculation and I don’t know what happens next.

It all leads to a lot of uncertainty and if there is one thing investors don’t like it’s uncertainty.

If the government wants us all to invest and to try to look after our futures then my opinion is this needs to be sorted out one way or another pretty quickly so we can all be confident we are putting our money into something reliable and worthwhile.

A bit like what we have been doing all along.

We could all do with a little less moving of the goalposts.

Shares Review – must improve these 3 things

In this Shares review, I’ll be looking at this social investing app and explaining 3 things it must improve on and how it might fit in with your investing strategy. Competition is tough in this world of investing apps and in this Shares review I want to see if this one has a chance.

An unbiased Shares review

When I look at a (new) investing app I’m interested in a few things.

  • Fees
  • Stocks are available
  • If there is an ISA offered
  • Customer service

Shares is still a very young app and has some ground to make in general if it is to catch up with it’s competitors, but it already has a few extra features that’s aren’t all that common in the more establish apps.

Image of landing page on a Shares review post
Shares Review – Is it going to knock the big boys off their perch?

Furthermore, it’s only available in a few countries at the moment, of which the UK is one.

At the time of this Shares review there was a global waiting list available to sign up for, so I guess further expansion is planned.

Read on to find more about my time with Shares and don’t miss the three things it must improve on to have a chance of stealing you away from your investing app of choice.

First Impressions of Shares

After using the Shares app, for a few hours I decided to offer up my experience in this Shares review. I have to say from the off, I think there are better options available, particularly for UK investors but also for our European friends.

And here is why…

Shares fees

Fees are part and parcel of a sustainable business. I have no particular issue with fees as long as they represent good value and are justified. In researching this Shares review I found there are very few fees at all.

No fees for bank transfer deposits, no debit card deposits, and no fees for withdrawals via bank transfer. There is a 2% charge for fast withdrawals by debit card (with a minimum of £0.55 charged).

So what is charged? Any transaction, buy or sell will be charged at £1 per trade. So if you buy a position in any share you will be charged £1 and you will be charged again when you sell. Since all of the stocks available on Shares are US based (more on this a little later) then you will also have to consider the cost of foreign exchange fees, charged at the interbank rate when you buy stocks in a currency that isn’t sterling. Not a fee charged by Shares necessarily but a cost to investing on this platform.

When investing large sums with Shares, £1 per trade mightn’t be too bad, but if you only want to invest with smaller sums, maybe £10-£100 at a time, factoring a £2 cost to buy and then sell might start to look a bit expensive. Buying and selling £10 worth of shares would be a 20% hit to trade. Eeek…

This is the first thing that Shares needs to address. Either offer something cheaper for smaller investors or offer some sort of trading free of charge. Trading 212 do it, InvestEngine do it and they offer more perks too.

How charges fees may have changed since I wrote this Shares review, so you can check out all the latest information on Shares fees on their website here:

What can I buy on Shares?

Shares currently offer US stocks only. It’s a little limited in my opinion.

Sure, there is Tesla and Amazon and Microsoft and all the household names, but many UK and European investors will want to invest a little closer to home in stocks listed on UK indices.

Further, I’m a champion of diversified, long term investing and I was disappointed to see there are no ETF (Exchange Traded Funds) available to buy on Shares.

This is the second area I think really needs to improve. Offering only US based stocks means UK investors have fewer options compared to the likes of Trading 212. European investors might find Lightyear to be a better option with a much greater offering of stocks to buy.

By the way, I have a full review of what Lightyear offers over here.

The third thing Shares need to improve on is a little later in this Shares review, but let’s have a look at what is good about Shares and what sets it apart next.

A review of customer service on Shares

Sign up was easy. The app is very smooth, and the onboarding process was painless. Some regulatory questions along with the usual name, address etc and I was using the app within about 5 minutes.

Customer services are available from within the app and I found them to be pretty responsive. There is a common questions and a FAQ section to get you moving on the common issues, but if this doesn’t resolve the issue you have then you have have a Shares representative answer your query via a messaging system.

Smooth enough and I was answered pretty promptly.

What makes Shares different?

Some time back I was asked to consider becoming an ambassador for and part of the pitch was this statement

We’re a social media business doing finance, not the other way round

Shares.IO pitch

Social investing isn’t anything new particularly. eToro are one such company that pushes this idea, but it’s clear that to are placing the idea of collaboration front and centre of their app.

Top-down image of friends collaborating on their computers
Shares want you to get social on the app

It’s cool, in the sense that if you have like-minded friends on the app, you have a place to chat about stocks and shares. You can have the app search for your contacts and add them, or you can follow other people you already know to be on the app.

I found that you had to know who you were looking for first. There wasn’t a list of popular investors like there would be a eToro for example. I couldn’t see a list of investors and their profiles and from there decide who to follow on Shares.

It made it a little cumbersome and difficult to get moving with this feature.

Shares Ambassadors

In the end I dropped in on their website and found a couple of their ambassadors to follow – that way I could search by name.

Image of finding people to follow on Shares
Add folks to follow on Shares is a bit of a pain

When you find someone you want to follow and hit that follow button, you have to wait to be approved. Why? Not sure yet. Privacy is important but when you push the idea of social trading why not immediately allow others to see what you are doing? Even two days I still hadn’t had my requests to follow accepted.

Image of the Williams sisters showing their partnership with Shares
The Williams sisters have partnered with

Feeling a bit… underwhelmed with Shares

It all seems a bit incomplete at this stage, if I’m honest.

Perhaps that’s understandable for a relatively new app. Get the main features out the door and build as you go. Onboarding new customers will be a gradual process as more and more features arrive.

However, I think they are missing one crucial element of attracting new UK customers. There is no ISA offering.

There is no ISA offering from

It isn’t the end of the world there is no ISA. General investing platforms are fine. You might not even want an ISA from Shares. Maybe like me you have your ISA with a different provider and you just want to dip your toes trying out something else.

Perhaps you have already maxed your ISA allowance for this year and you have arrived at this Shares review, just looking to find out about some options for when you have maxed your allowance.

In any case, without an ISA offering, Shares are definitely putting themselves at an immediate disadvantage here in the UK. Considering a platform like Lightyear, you could say they don’t have an ISA offering either, but at least they offer things like a decent interest rate on uninvested cash and money market funds. Here on Shares, there isn’t anything like that… not yet, at least.

Summary of review

When you roll all these factors together, I just can’t see enough in to get me excited about investing with this app. I just feel there are better apps available to get your attention that offer more for less.

However, if you do want to try it out you can get yourself £5 free when you sign up and deposit £1 using this link. For disclosure, I might get a reward when you sign up for referring you, but it’s a great way to support the site at no cost to you.

Interested in seeing how I invest? Have a read at how I use InvestEngine for long term (cheap) investing.

A beginner’s guide to money market funds (MMFs)

Beginner's guide to money market funds
A beginner’s guide to money market funds (MMFs)

A week ago, I had never heard of money market funds. It’s true! This money blogger needed a beginner’s guide to money market funds! So I wrote one.

In this article I’m cutting through the fluff to offer this beginner’s guide to money market funds through the eyes of a beginner. I’ll talk about what a money market fund is, why you might like to invest some money here, where you can do that, and some of the pros and cons of getting involved with money market funds.

Plus! I’m going to do this in a jargon-free way, so you can decide easily if money market funds are a good investment option for you.

Of course, nothing in this article is investing advice. It’s for information and entertainment only. Please consult a professional if you need real advice!

A beginner’s guide to money market funds by a beginner

The first thing I do these days, is ask ChatGPT a question. What is a money market fund?

A money market fund is a type of mutual fund that invests in short-term, low-risk, and highly liquid securities. These funds are designed to provide investors with a safe place to park their cash and earn a modest return while preserving capital and maintaining liquidity. Money market funds are often considered a suitable option for investors seeking a stable and conservative investment vehicle.


More questions than answers in there, maybe!

So let’s break this down.

A money market fund is a type of mutual fund that invests in short-term, low-risk, and highly liquid securities

What is a mutual fund?

A mutual fund is a kind of investment offered by a management company, that pools the money from multiple investors into one big pot. This big pot is then invested in a range of things like stocks, bonds, money markets or other assets like these.

There are quite a number of advantages that a mutual fund can offer.

Diversity is one – not keeping all your eggs in one basket.

Another is through pooling all the resources. Access to some instruments, (things to invest in) can be quite expensive on an individual basis so by pooling all the resources, potentially, more options open up to the managers of the mutual fund. Economies of scale come into play.

It’s also true that mutual funds are usually highly liquid, which means individuals can usually buy and sell their positions very quickly.

So a money market fund is one that invests in products that are low risk and low return and invest in things called “cash equivalents”. Investments are not made into cash, but things that are very close to it – a variety of short-term, highly liquid, and low-risk financial instruments.

What exactly is in a money market fund?

As with most funds, what’s in it depends on the goal of the fund.

However, from a ‘beginner’s guide to money market funds’ point of view, let’s look at a couple of examples.

One instrument might be Treasury Bills – considered one of the most cash-like instruments due to their high credit quality and very short maturities. Issued by governments and backed by government they are considered a very safe choice.

Another might be Repurchase Agreements – these are short-term agreements where one party sells securities to another with a promise to repurchase them at a slightly higher price on a specified future date.

While money market funds invest in instruments that are similar to cash in terms of liquidity and stability, it’s important to note that there is always some level of risk involved.

While these investments are extremely low risk, they are subject to fluctuations in interest rates, credit risk, and market conditions.

Why would you choose to invest in a money market fund?

The appeal of money market funds are three fold:

  • Liquid – you can turn your investment into cash again very quickly
  • It’s short term – so you are never locked into a particular rate of return for very long
  • It’s very safe (but not infallible) due to the high credit rating of the investments. This means the folks who have borrowed are very unlikely to fail to pay that money back to the lender.

With all these things in mind, you might choose to use a money market fund if you are parking cash for whatever reason, and want to try to get a better return than an easy access bank account.

Another reason to consider money market funds is if you are seeking to diversify a portfolio of investments. Money market funds aim to provide capital preservation – to keep your initial investment safe – while offering relatively low gains.

Finally another good reason to consider investing in money market funds is if you are looking for an interim investment while you consider your next move. The liquid nature means you can quickly pivot out of money market funds for something else, relatively easily.

You could reasonably expect that you would at least get back your capital when exiting your money market fund position. So for every pound or dollar you put into that money market fund, you should be able to withdraw at least that again.

This sounds a lot like a saving account, no?

It does a bit! While you aren’t exactly taking a position in cash like you would with a bank, you are buying cash-like instruments. From that point of view you have to decide if you would be better off just having an easy access account with your bank.

That’s fine. The issue is that the returns on easy access bank accounts are likely to be lower than the returns that a money market fund aims to make. You can usually expect smaller returns with an easy access account than you would would expect with a money market fund.

If you are prepared to lock up your cash in a bond or a fixed term deposit account with a bank you may find a fixed rate of return for a fixed amount of money to be more beneficial in your circumstances. Banks also offer FSCS protection on your investment as standard.

So should a beginner invest into money market funds?

Really, there is no “better” option here when choosing between money market funds or traditional bank accounts, or even investing in other stocks and shares – the more advantageous option for you really depends on your circumstances and this beginner’s guide to money market funds is not about to tell you which you should go for!

A beginner’s guide to money market funds – an example

No beginner’s guide to money market funds would be complete without an example. So here goes! Lightyear are one of the platforms that I use that offer money market funds – they have partnered with Blackrock here to offer three money market funds.

Let’s take a look at BlackRock ICS Sterling Liquidity Fund for our example.

Please note that the figures in this screenshot are accurate at the time of the creation of this blog post. Things may have changed since (and most likely have since these funds are heavily dependant on current interest rates and are very short in their duration) so please make sure you check the up to the minute info available on the Lightyear app or simply search for the fund to get all the information you need. Your capital is at risk when you invest.

The BlackRock ICS Sterling Liquidity Fund

Every investment has a purpose; a goal if you like. What is the point of this money market fund.

Illustration of BlackRock ICS Sterling Liquidity Fund highlights
The purpose of the money market fund

This fund aims to maximise income by providing investors with a low-risk avenue for investing in secure (AAA rated) and highly liquid, debt-based assets and cash-equivalents.

Illustration of BlackRock ICS Sterling Liquidity Fund quality
BlackRock ICS Sterling Liquidity Fund quality

Triple A rated is the highest rating you can have for an investment in terms of how safe your capital is. According to Standard and Poor the definition is “Extremely strong capacity to meet its financial commitments”.

What returns can I expect as a beginner to money market funds with the BlackRock ICS Sterling Liquidity Fund?

The headline figure is 5.15% gross per annum. However, this is based on a one day yield and you will very likely see fluctuations in this return on a frequent basis. This rate will be particularly impacted by Bank of England interest rate changes.

(Capital at risk. Gross yield shown as of 18/08/2023, subject to daily fluctuation and fees)

Consider the past decade – interest rates were at all time lows with the Bank of England and so the returns from this money market fund were very low also. As we see the rate rises over the last year or so, we see a rise in the returns of this money market fund.

Interest rate rises aren’t the only thing to contribute to changes in the returns of money market funds, but they are huge factor.

A beginner's guid to money market funds - BlackRock ICS Sterling Liquidity Fund historical returns
BlackRock ICS Sterling Liquidity Fund historical returns

There are associated fees with investing in this fund and I will address those a little later, but having this figure of 5.15% allows us to make some projections about what this fund could return you, if it were to stay the same.

For example…

Investing in this Blackrock money market fund with Lightyear would look like this:

Image of calculation of potential returns of an investment in a money market fund
How investing £50,000 could look

How will fees affect my investment?

Fees are always a factor, so take into account the provider fee, which is Blackrock in this case, and any platform fees (with Lightyear in this example) before you come up with any final figure. £196 is the monthly return on a £50k investment at 4.7%. If you invest in money market funds outside of an ISA then you may be subject to tax on your gains also.

In this screen capture from Interactive Investor, you can see that annual charges vary from 0.1% to 0.5%. The most expensive on this list is five times that of the cheapest! This aren’t necessarily the worst culprits either. Just be sure that you are getting value for whatever fees you pay.

Money market funds can have fees of varying sizes

It is worth noting that Lightyear currently pay 4.5% on uninvested cash. You can find out more about that here on their pricing page or in this article so investing in money market funds will bump that return slightly.

What does this fund invest in?

The majority of the make up of this fund is in Certificate of Deposits which is very low credit risk and very little interest risk because of the short duration. Indeed most of the holdings will mature in 1-7 days!

Overview of investments of a money market fund
Money market funds will be invested in safe securities
Maturities of a money market fund securities are very short
Maturities of securities in a money market fund are very short

How quickly can you get your money back from a money market fund?

The fund currently stands at over £34 billion, trades once per business day and has daily liquidity. This means that if you need your money quickly, you can get it back to cash very quickly.

As I said, there will be moderate changes to the yield on a daily basis but your capital is considered very safe. Overall it’s a very straightforward product and you shouldn’t worry about the pace at which you can exit a position.

Remember, when you invest, your capital is at risk.

(Capital at risk. Gross yield shown as of 18/08/2023, subject to daily fluctuation and fees.)

Find out more about Lightyear in this article, next.

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