HM Revenue & Customs (HMRC) will be lifting its ban on holding fractional shares within tax-free Individual Savings Accounts (ISAs), a move expected to encourage more investment in stocks.
Previously, HMRC ruled that fractional shares were not eligible for ISAs, despite many investment platforms such as Trading 212 and Freetrade, offering this option. However, the tax authority has now reversed this stance ahead of a potential legal change by the UK government, which could take effect as soon as September 30, according to the Financial Times.
Fractional shares enable investors to purchase parts of expensive stocks—such as Amazon, Tesla and Apple—for as little as £1, rather than needing hundreds or even thousands of pounds for a full share. This change is set to make investing more accessible to younger and less affluent individuals.
Matt Ford, CEO and co-founder of Sidekick, praised the decision, stating, “This pragmatic move by HMRC and commitment from Labour is a major boost for retail investors. Fractional shares are a key enabler for lowering barriers for entry level investing. At Sidekick we utilise fractional shares within our Flagship investment portfolio, to reduce the minimums needed to just £1K. Without fractionals, it would be in the tens of thousands..”
This development represents a significant win for retail investors, facilitating broader access to the stock market.
