Why Investing with eToro Could Cost You Thousands
Connor is a journalist with over 10 years' experience who specialises in finance and business news. Based in London, he also works for Sky News and the BBC.
Last updated 25th February 2026
8 min read
- eToro doesn’t offer their own ISA
- Investing with eToro leads to Capital Gains Tax on profits in the UK
- Our calculations show investing outside of an ISA could cost nearly £800k if investing £10k per year over a 40-year period
- eToro partnered with Moneyfarm to offer ISA investing
- Moneyfarm’s fees are relatively high and you cannot choose your own investments within their partnership
Editor's update: as of 12th February 2025, eToro offers an ISA with DIY investments via their partnership with Moneyfarm, with reduced fees compared to their managed accounts. The content on this page is now outdated and inaccurate when referencing eToro. The lessons within the content still teach a valuable lesson about tax-efficient investing, and we will repurpose this article in future.
Whether you're watching telly or doom scrolling on your phone, you've probably come across adverts for platforms where you can invest in stocks, cryptocurrencies and ETFs.
All of them make a big fuss about how they're easy and cheap to use – and one of them is eToro.
But here's the problem: for most British consumers, eToro is not the first place they should use for investing – and doing so could hit them in their pocket. Hard.
Here's why:
Stocks and Shares ISAs allow you to invest up to £20,000 a year into stocks and funds inside a tax wrapper, meaning any gains you make through market rallies and dividends is completely tax-free.
They can be a powerful way to build wealth if these savings are left to accumulate for years. And while many investment platforms offer the ability to invest via ISAs to their customers, eToro doesn't.
This means you'd owe capital gains tax on any profits made on the eToro platform above the annual £3,000 capital gains tax threshold.
Let's put this another way: unless you've already maxed out your £20,000 annual ISA deposit allowance, buying shares on eToro is a really bad idea – mathematically speaking.
Research from Shepherds Friendly suggests 53% of adults don't even have an ISA – and just 7% of those Brits make use of their full £20,000 allowance according to Resolution Foundation.
Meanwhile, the latest figures we could find indicate that eToro had about 3.2 million customers in the UK.
We're not disputing that eToro may be easy to use and accessible for newcomers starting to find their feet when investing.
Our issue is that using it makes little financial sense unless you're blessed with savings that have already been deployed in the most tax-efficient way possible.
To show you why this is worth jumping up and down about, let's crunch some numbers.
And if you want to view a range of tax-efficient options in the UK, check out our free broker cheat sheet.
Financial Interest provides guidance, not advice. If you’re unsure about anything, speak with a qualified adviser. When investing, your capital is always at risk. Past performance does not guarantee future results.
Over the past 10 years, Stocks and Shares ISAs have typically delivered average returns of about 9.64% per year.
The exact figure varies wildly from year to year depending on the state of the economy.
That 9.64% annual increase is a tax-free gain the government can't touch.
And this brings us neatly to the power of compounding.
Let's imagine you've maxed out your £20,000 Stocks and Shares ISA allowance, and 12 months later, it's appreciated by 9.64%. You'd be left with a balance of £21,928 – a gain of £1,928.
In this scenario, you don't withdraw any of that cash. Instead, you leave it untouched for another year.
This is where the compounding kicks in. Now, you're not just making gains on your initial investment, but earning returns on your previous returns as well.
By the end of the second year, again assuming there's been growth of 9.64%, the total balance would be £24,042. That's a return of £2,114 – £186 more than the year before.
Here's how that initial £20,000 could grow tax-free over 40 years – assuming three things: no additional deposits are made, you make no withdrawals, and make returns of 9.64% a year:
| Time | Value of investment | Yearly gain | Total gain |
|---|---|---|---|
| Year 0 | £20,000.00 | £0.00 | £0.00 |
| Year 1 | £21,928.00 | £1,928.00 | £1,928.00 |
| Year 2 | £24,041.86 | £2,113.86 | £4,041.86 |
| Year 3 | £26,359.49 | £2,317.64 | £6,359.49 |
| Year 4 | £28,900.55 | £2,541.06 | £8,900.55 |
| Year 5 | £31,686.56 | £2,786.01 | £11,686.56 |
| Year 6 | £34,741.15 | £3,054.58 | £14,741.15 |
| Year 7 | £38,090.19 | £3,349.05 | £18,090.19 |
| Year 8 | £41,762.09 | £3,671.89 | £21,762.09 |
| Year 9 | £45,787.95 | £4,025.87 | £25,787.95 |
| Year 10 | £50,201.91 | £4,413.96 | £30,201.91 |
| Year 20 | £126,011.60 | £11,079.46 | £106,011.60 |
| Year 30 | £316,301.17 | £27,810.50 | £296,301.17 |
| Year 40 | £793,946.19 | £69,807.02 | £773,946.19 |
Seeing the figures in black and white is pretty astounding.
In 10 years, the original £20,000 investment could deliver tax-free gains of £30,202.
After 40 years, that £20,000 could be worth £793,946. Tax-free.
Calculations Using eToro
Now it's time to turn our attention to eToro – and imagine that you've taken that same £20,000, picked exactly the same stocks and ETFs, and enjoyed the same returns.
Because there's no ISA on offer here, you'll be on the hook for capital gains tax (CGT).
The government has dramatically slashed the annual tax-free allowance on CGT in recent years – from £12,300 in 2022/23 to just £3,000 as of 2024/25. That means HMRC will come knocking for a slice of your gains a lot sooner than before.
Current CGT rates stand at 10% for basic rate taxpayers, and 20% if you earn more than £50,271 a year.
Here's how your capital gains tax bill of 20% would rack up on eToro over time, assuming you're a higher or additional rate taxpayer, have no other investments, and CGT remains static:
| Time | Value of investment | Yearly gain | Capital Gains Tax owed |
|---|---|---|---|
| Year 1 | £21,928.00 | £1,928.00 | £0 |
| Year 2 | £24,041.86 | £2,113.86 | £208.37 |
| Year 3 | £26,359.49 | £2,317.64 | £671.90 |
| Year 4 | £28,900.55 | £2,541.06 | £1,180.11 |
| Year 5 | £31,686.56 | £2,786.01 | £1,737.31 |
| Year 6 | £34,741.15 | £3,054.58 | £2,348.23 |
| Year 7 | £38,090.19 | £3,349.05 | £3,018.04 |
| Year 8 | £41,762.09 | £3,671.89 | £3,752.42 |
| Year 9 | £45,787.95 | £4,025.87 | £4,557.59 |
| Year 10 | £50,201.91 | £4,413.96 | £5,440.38 |
| Year 20 | £126,011.60 | £11,079.46 | £20,602.32 |
| Year 30 | £316,301.17 | £27,810.50 | £58,660.23 |
| Year 40 | £793,946.19 | £69,807.02 | £154,189.24 |
As you can see, the pain really starts to kick in as time goes on.
After the first 10 years are up, you would needlessly owe £5,440.38 to the taxman. But that's just the start, and you can see a detailed breakdown of our calculations in this public spreadsheet. After 20 years, the total figure reaches £20,602.32. And after 40 years, it adds up to a staggering £154,189.24.
The financial damage of using eToro for investments instead of a Stocks and Shares ISA becomes even more apparent if you add to your savings every year.
Let's do one final comparison:
For this, let's assume that instead of investing £20,000 as a one-off lump sum, this time you invest £10,000 per year on an ongoing basis.
Once again, assuming average returns of 9.64%, here's how the balance would compare between a Stocks and Shares ISA and an eToro account:
| Time | ISA balance | Tax owed | eToro balance | Tax owed |
|---|---|---|---|---|
| Year 0 | £10,000.00 | £0 | £10,000.00 | £0 |
| Year 1 | £20,964.00 | £0 | £20,964.00 | £0 |
| Year 5 | £76,458.23 | £0 | £76,458.23 | £2,691.65 |
| Year 10 | £181,749.88 | £0 | £181,749.88 | £13,749.98 |
| Year 20 | £612,858.51 | £0 | £612,858.51 | £79,971.70 |
| Year 30 | £1,694,982.39 | £0 | £1,694,982.39 | £276,396.48 |
| Year 40 | £4,401,216.83 | £0 | £4,401,216.83 | £799,643.37 |
We did not add any additional fees you may receive for selling or withdrawing to do this – the actual profit differences could be even higher.
In this scenario, choosing an eToro account over a Stocks and Shares ISA would have cost you £799,643.37 in Capital Gains Tax if you realised your gains after 40 years.
Even if you chose the Stocks and Shares ISA provider with the highest fees on the market, you'd still be quids in compared to investing the cash into businesses and funds using eToro.
But this can't be stressed enough – this problem isn't exclusive to eToro.
The same could be said for any other trading platform that fails to offer an ISA to its customers, for example Robinhood.
However, unfortunately for these platforms, there are a number of competitors that do offer ISAs, whilst still maintaining easy access and user-friendly trading features.
eToro's ISA (via Moneyfarm)
Back in March 2023, eToro announced that it was going to start allowing its customers to access a Stocks and Shares ISA through Moneyfarm – meaning a user's ISA balance would be displayed within their eToro portfolio.
While this is a step in the right direction, this isn't the same as eToro offering ISAs directly.
You'll still be liable for capital gains tax on profits made on all shares, funds and commodities you purchase via eToro.
And Moneyfarm doesn't allow you to purchase individual shares via their partnership with eToro – in fact, they allow very little control over how your funds are invested at all. You have to sign up with them separately if that's what you're looking for.
This is very different to eToro where you have full control over your investments.
If active fund management is what you're looking for, Moneyfarm's fees are very high compared to many leading brokers.
For one example, Vanguard – certainly not the cheapest broker around – charges a 0.15% platform fee.
If you wanted to invest £20,000 with Moneyfarm, the platform fee is over four times higher at 0.65%.
In Summary
To cut a long story short, eToro is only really worth considering if you've already exhausted your £20,000 ISA allowance for the year, meaning you've got no choice but to pay capital gains tax on your additional investments.
Even then, it's crucial to compare eToro's fees and features against rivals.
For example, the trading platform charges $5 per withdrawal, while others allow you to cash out for free.
eToro also offers contracts for difference (CFDs) within their regular share offering, which could mean you won't end up owning the underlying asset directly if you click the wrong buttons.
There are reasons to like eToro. Its site is user friendly, the social elements of the website allow you to interact with like-minded investors, and there's a vast choice of assets on offer.
But unfortunately, this pales in comparison to the ability to invest £20k a year without paying a penny in tax on all future gains.
Financial Interest provides guidance, not advice. If you’re unsure about anything, speak with a qualified adviser. When investing, your capital is always at risk. Past performance does not guarantee future results.
