There are various types of fees charged by trading platforms:
Share trading fee
This is a flat fee charged by the platform each time you buy or sell shares. Some platforms charge no share trading fee, while others may charge around £3-5 per trade. Trading fees are usually higher for US or other overseas shares.
Some trading platforms charge trading fees of up to £12, however, we have excluded platforms charging share trading fees of over £5 as these are an expensive option for day traders.
This is an annual fee charged for holding the shares on your platform and is sometimes called a custody fee. Our best trading platforms do not charge platform fees, other than IG for less-frequent traders (less the three trades per quarter).
Looking at the wider market, some platforms charge a flat fee and others charge a percentage, typically 0.25% to 0.45% of the value of your portfolio.
These fees will usually be taken out of any cash held on your account, or you can pay fees directly by debit card. The platform is likely to sell a proportion of your shares (as a last resort) if fees remain unpaid.
It’s worth looking at the types of investments that incur a platform fee as some platforms charge for holding funds, but not for shares. When a platform fee is charged for holding shares, this is sometimes capped at a maximum amount per year.
There are two types of percentage-based platform fees:
- Tiered fee: this is the most usual type of platform fee, whereby you pay different fees on different ‘slices’ of your portfolio. For example, if you have a portfolio worth £300,000, you might pay 0.45% on the first £250,000, then 0.25% on the next £50,000. Tiered fees are charged by trading platforms such as Hargreaves Lansdown and AJ Bell.
- Non-tiered fee: a few platforms, such as Fidelity, charge a non-tiered fee, whereby you pay the same fee across your whole portfolio. For example, if you have a portfolio of £300,000, you would pay 0.2% on the whole £300,000.
Foreign exchange fees
Where you buy or sell shares denominated in a currency other than pounds sterling, nearly all of the platforms charge a foreign exchange fee. This is also referred to as a foreign currency conversion fee and typically varies from 0.1% to 0.5%. Some platforms also charge a higher trading fee for overseas shares.
A small number of platforms allow you to hold foreign currency in your account, which enables you to convert it once and use this money for buying shares and holding the proceeds from selling shares in the local currency
Some of the platforms charge other types of fees, such as inactivity fees and withdrawal fees (for accounts held in an overseas currency) and fees for trading by telephone.
Although not technically a fee, platforms also make money on the buy-sell spread on shares. For example, you might be looking to buy a share with a buy-sell spread of 100-102 pence. This means that you would pay 102 pence to buy a share, and receive 100 pence to sell a share.
Some platforms may offer more competitive buy-sell spreads than others, and less traded shares, such as FTSE Small Cap companies, typically have wider spreads compared with FTSE 100 companies.