Flat fees vs percentage fees - are you paying too much for your investments?

Choosing the best investment platform for your money can be tricky.

Whether you want a general investment account, ISA or self invested personal pension (SIPP), you need to look at the investment range, customer service, functionality (such as whether it has an app), and of course, the fees.

Comparing platform charges is challenging and sometimes downright bewildering, but they are important as they can eat into your returns.

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Every platform has its own set of fees, which may depend on the size of your investment portfolio, and how often (and which assets) you trade. Some charge initial fees, annual fees, and/or exit fees.

While most platforms charge percentage fees, a few levy flat fees. This makes comparisons even harder.

Is a fee that is charged as a percentage of your portfolio, or a fixed flat fee, a better choice for you?

We investigate the flat versus percentage debate, and reveal some fascinating cost comparisons.

Which investment platforms charge flat fees?

Most investment platforms charge an annual fee that is expressed as a percentage of the investor’s portfolio. So if you have £50,000 in an ISA, and the annual fee is 0.45%, you would pay £225 a year.

The more you have invested, the greater the fee.

In contrast, a few platforms charge flat fees. Interactive Investor has several different price plans, which all have flat fees. The cheapest is £59.88 a year and can be used for portfolios containing less than £50,000. Trades cost £3.99. Above this level, the cheapest flat fee is £143.88 a year. The platform’s fees are changing from 1 February 2026 and the cheapest plan will start at £5.99 per month or £71.88 a year.

Interactive Investor argues that its fees are “flat and predictable” and can be significantly cheaper than its competitors that charge percentage fees.

Meanwhile, Scottish Widows Share Dealing, formerly IWeb, which is owned by Lloyds Banking Group, doesn’t charge any annual or ongoing fees. Trades cost £5 each.

Halifax Share Dealing charges £36 a year for a stocks and shares ISA and share dealing account, plus £9.50 for each trade.

Platforms that charge percentage fees

The rest of the big investment platforms charge percentage fees. Some have a tiered scale, so the percentage fee drops the more money you have in your account. It may also vary depending on what you invest in.

For example, Hargreaves Lansdown charges 0.45% on ISA portfolios worth up to £250,000. Any money between £250,000 and £1m has a fee of 0.25%, between £1m and £2m attracts a fee of 0.1%, and anything above £2m has no charge.

These fees apply if you’re investing in funds. If you’re buying shares, the fee is 0.45% regardless of the size of the portfolio, capped at £45 a year.

AJ Bell has a similar model. It charges 0.25% for ISA portfolios that only invest in funds, reducing to 0.1% on the value between £250,000 and £500,000, and then no charge for money held above £500,000.

For portfolios that invest in shares (including investment trusts and ETFs), the annual fee is 0.25%, capped at £3.50 a month.

We told you platform fees were complicated and tricky to compare!

Cost comparisons

We asked the consultancy The Lang Cat to crunch the numbers for us to try and show a meaningful comparison of the costs of different-sized portfolios.

Will a platform with a flat fee or a percentage fee be crowned the cheapest?

The below table shows 14 popular platforms, and compares portfolio sizes ranging from just £5,000 all the way up to £1m.

The costs are for investing through a stocks and shares ISA on the platform for one year, including ongoing platform fees, any additional wrapper charges, opening fees, and the fees for making 12 regular investments in funds.

Source: The Lang Cat

So you could build and run an investment portfolio of any value for free with Scottish Widows Share Dealing, assuming you make 12 regular investment trades in a year through its ISA. Regular investing is free on the platform but you will be charged £5 for any other UK trades.

You will need to weigh this up against the research tools and recommendations as well as the functionality that other higher cost platforms can provide.

Liz Evans, market analyst at The Lang Cat, said: “Price alone isn’t a proxy for suitability, nor is it even a substitute for value for money.

“That’s a personal decision and there are a number of other factors to bring into the equation. How much stock you place in a household name, how much help you need picking investments, even intangibles like the general look and feel of the user interface and how the organisation communicates towards you can all be important matters. But it’s personal.

“On the pure arithmetic side of things, specifically how much money you have to set aside regularly, the investment type you plump for and the destination wrapper choice are all factors too.”

What’s the best fee structure for large portfolios?

Clearly, the larger the investment portfolio, the higher the fee will be with a platform that has a percentage-fee structure.

Some platforms have sought to reduce the impact of a percentage fee on big portfolios with lower percentage fees for large values.

However, the table shows that investors with ISAs worth £100,000 or more could pay hundreds - or even thousands - of pounds in extra charges for choosing a percentage platform rather than a flat-fee competitor.

At £100,000, an investor could pay just £36 with Halifax, or £450 with Hargreaves Lansdown. At £250,000 the cost of choosing Hargreaves rises to £1,125 a year, then £1,750 for portfolios of £500,000, and then £3,000 for £1m portfolios. Meanwhile, the cost of having your ISA with Halifax remains at £36 a year, even for a £1m portfolio.

According to Interactive Investor, which is the second-cheapest flat-fee platform for smaller ISA portfolios, a percentage-fee platform can be more than 10 times more expensive for accounts worth £500,000 than its own platform.

It says the difference between flat fees and percentage charges can be “jaw-dropping”. It adds: “The more your pot grows, the worse the percentage charges can bite."

What else do I need to consider?

While fees are an important factor when picking a platform - high fees can seriously erode your returns over time - they should not be the only factor.

For example, Vanguard may be cheap for small ISA portfolios, but investors can only choose from Vanguard funds. If you chose a slightly more expensive platform like Charles Stanley Direct or Halifax Share Dealing, you would have a much wider investment range.

Meanwhile, you may wish to consider other features, such as whether the platform has an app, whether it offers other products like a Sipp or a junior ISA, and whether it pays interest on cash balances.

Jason Hollands, managing director of Bestinvest (which charges a percentage fee), argues that while investors care about fees, “their real focus is value-for-money”.

He says investors should look closely at the service they receive for the fees paid. For example, with Bestinvest, customers receive free coaching sessions with qualified financial planners and “a wide range of low-cost managed portfolios that are substantially cheaper than many so-called ‘robo-advisers’.”