The true cost of investing: how to understand and compare share-dealing and fund charges

Most people pay close attention to how their investments perform and much less to what they pay to hold them. Yet charges are one of the few parts of investing you can control. Returns are never guaranteed, but costs are taken whether markets rise or fall.

This guide explains the main charges UK investors face, how they compound over time, and a practical way to compare providers. It is general information, not personal advice.

Why small percentages matter

A charge of 1% a year sounds trivial. Over a long period it is not, because the money taken in fees no longer grows for you.

Here is a simple illustration. It uses a hypothetical, steady growth rate, which real markets never deliver, and ignores tax and inflation. Imagine £20,000 invested for 20 years with an assumed underlying return of 5% a year:

• No charges: roughly £53,000
• Total charges of 0.5% a year (net 4.5%): roughly £48,200
• Total charges of 1% a year (net 4%): roughly £43,800

The gap between the cheapest and most expensive scenario is more than £9,000, from the same starting sum and the same underlying investment growth. The numbers are illustrative only, but the principle holds: over long periods, the difference between paying a little and paying a lot can be substantial.

The main types of charge

Investment costs usually come in layers. It helps to separate them.

Platform or account fee

This is what the investment platform or broker charges to hold your investments, often called an administration, custody or account fee. It typically comes in one of two forms:

• Percentage fee: a proportion of the value of your account each year. Some platforms use tiered rates that fall as your balance rises, and some cap the fee for shares and investment trusts.
• Flat fee: a fixed monetary amount per month or year, regardless of how much you hold.

Some providers charge differently depending on the wrapper. A stocks and shares ISA, a self-invested personal pension (SIPP) and a general investment account may each carry different fees on the same platform.

Fund charges

If you invest in funds, such as unit trusts, OEICs or exchange-traded funds (ETFs), the fund manager takes its own charge, separate from the platform's. The headline figure is usually the ongoing charges figure (OCF), expressed as a percentage per year and deducted from the fund itself, so you will not see it as a separate bill.

Funds also incur transaction costs when the manager buys and sells holdings. These are not included in the OCF but appear in the costs and charges information firms must provide. Passive index trackers tend to have lower charges than actively managed funds, though cost is only one factor in choosing a fund. How diversified it is matters too, as our guide to the FTSE 100 and diversification explains.

Investment trusts, which are listed companies, usually publish an equivalent ongoing charge.

Dealing charges

Many platforms charge a fee every time you buy or sell shares, investment trusts or ETFs. Some also charge for fund trades, though many do not. Providers often offer a cheaper or free option for regular investing, where trades are bundled and placed on a set day each month.

If you trade frequently, dealing charges can quickly outweigh every other cost.

Foreign exchange fees

Buying shares listed overseas, such as on US exchanges, usually means converting pounds into another currency. Platforms typically apply an FX charge, as a percentage of the transaction, on top of the exchange rate. It applies when you buy, when you sell, and sometimes when overseas dividends are converted back into sterling. These charges can be easy to overlook.

Stamp duty on UK shares

When you buy shares in UK companies electronically, you normally pay Stamp Duty Reserve Tax at 0.5% of the purchase price. Paper share transfers attract stamp duty at the same rate on transactions above £1,000. You pay nothing when you sell.

There are exceptions. Shares on AIM, the London Stock Exchange's growth market, are generally exempt, and most ETFs do not attract it on purchase. Since 27 November 2025, shares in companies that newly list on a UK regulated market are also exempt for their first three years of trading, although this relief does not cover paper transfers. Investment trusts are listed companies, so buying their shares normally does attract the 0.5% charge. Tax rules can change, so check the current position on gov.uk.

The spread

Shares and ETFs have a buying price and a slightly lower selling price. The difference, called the bid-offer spread, is a hidden cost of trading. It is usually small for large, frequently traded companies and wider for smaller or less liquid ones.

Other fees to look for

Check a provider's charges sheet for less obvious costs, such as fees for:

• transferring your account to another provider
• paper statements or telephone dealing
• holding certain types of investment
• inactivity, on some accounts

Many platforms have dropped exit fees in recent years, but it is worth confirming before you sign up and before you leave.

Also check what happens to uninvested cash. Platforms often pay less interest on cash than they earn on it, and from 6 April 2027 any interest paid on cash held inside a stocks and shares ISA will face a 22% charge. Leaving large sums uninvested can become a hidden cost.

Percentage or flat fee: which works out cheaper?

This depends mainly on how much you hold. As a rule of thumb, percentage fees tend to suit smaller portfolios and flat fees tend to suit larger ones.

To find your own break-even point, divide the annual flat fee by the percentage rate. For example, using made-up figures, a flat fee of £120 a year compared with a percentage fee of 0.25% would break even at £48,000 (£120 ÷ 0.0025). Below that, the percentage fee would be cheaper. Above it, the flat fee would be.

The calculation is only a starting point. Remember to factor in:

• Dealing charges: a platform with a low account fee but high dealing costs may be more expensive if you trade regularly.
• What you hold: some platforms charge less on shares and investment trusts than on funds, or cap fees for certain assets.
• Growth over time: a portfolio that is small today may cross the break-even point in a few years.
• Which wrappers you need: if you want both an ISA and a SIPP, compare the combined cost.

A practical way to compare providers

When comparing platforms, try this approach:

1. Work out your likely behaviour. Estimate how much you will hold, what you will invest in, how often you will trade and whether you will buy overseas shares.
2. Gather the full charges sheet from each provider, not just the headline rate.
3. Calculate a realistic annual total in pounds, including account fees, typical dealing costs and FX charges.
4. Add fund charges separately. These are the same whichever platform you use for a given fund, but they still affect your overall cost.
5. Consider service and security. Price matters, but so do ease of use, customer service and the range of investments.

Whatever you choose, make sure the firm is authorised by the Financial Conduct Authority. You can check the Financial Services Register via fca.org.uk. Under the FCA's Consumer Duty, firms are expected to communicate clearly and offer fair value, which should make charges easier to understand.

Reviewing what you already pay

If you already invest, it is worth reviewing your costs every year or two. Providers must send you a statement of costs and charges, usually annually, showing what you paid in pounds. Many people are surprised by the total.

If you find you are overpaying, switching may help. If you move a stocks and shares ISA, use the new provider's formal transfer process rather than withdrawing the money yourself, or you may lose the tax-free status of those savings. Our complete guide to the different types of ISA explains how ISA transfers work. Similar care applies to pension transfers.

The bottom line

Lower costs do not guarantee better results, and the cheapest option is not always the right one. But charges reliably reduce returns, so understanding exactly what you pay, and why, is one of the most useful steps any investor can take.

For free, impartial guidance on investing and pensions, visit moneyhelper.org.uk. If you are unsure what is right for your circumstances, consider speaking to a regulated financial adviser.

This article reflects the rules as at 15 October 2026. It is general information only and is not personal financial advice. The value of investments can fall as well as rise, and you may get back less than you invest.