Is Commission-Free Trading Really Free?

Commission-free trading means exactly what it says about one charge: no dealing commission when you buy or sell. It does not mean the investment costs nothing. Freetrade states plainly that it does not charge commission to buy or sell stocks and ETFs, and that there are no fund holding fees¹. Its mutual funds page lists dealing commission of £0 per fund trade².

What remains is a set of charges that sit outside the dealing commission. Foreign exchange fees apply when you trade overseas shares, fund managers still take their ongoing charge out of the fund each year, stamp duty still applies to UK share purchases, and some platforms charge a subscription or platform fee. Which? describes how no-fee platforms make their money: through foreign exchange fees or keeping cash interest, or by upgrading customers to paid products such as managed portfolios or premium tiers³.

The practical question is not whether dealing is free, but what the total cost of holding and trading an investment comes to. That total is made up of the platform's own charges, the charges inside the fund or investment trust, and the taxes that apply to the transaction. Each of those is set by a different party and disclosed in a different document.

Commission-free is not cost-free: the charges that remain

The dealing commission is one line in a longer bill. Freetrade's own stocks and shares page carries the caveat that other charges may apply, such as FX fees⁷. That is the pattern across the market: the headline charge is removed, and the remaining charges carry the cost.

Foreign exchange is the most common of these. Halifax Share Dealing advertises commission-free international trading while stating that FX charges of 1.25% still apply⁸. Its Stocks and Shares ISA page repeats the point: no dealing commission is charged for international online trades, but FX rates still apply⁹. A reader comparing a UK trade with a US trade is therefore comparing two different cost structures, even on the same platform.

Fund charges are the second layer, and they are charged by the fund manager rather than the platform. Which? lists the costs a fund can carry: the ongoing charge figure, performance fees, trading fees and stamp duty reserve tax, exit fees, and platform fees¹⁰. The ongoing charge is an annual percentage of your investment, so it applies for as long as you hold the fund, whether or not you ever deal again.

Taxes are the third layer. Stamp duty is charged on buying UK shares and UK-based investment trust shares, and it is not a platform charge, so no platform can waive it. The Association of Investment Companies gives the worked example that when you buy £100 of shares you pay 50p stamp duty⁴.

Buying and selling funds at Freetrade: no dealing commission

Freetrade is one of the platforms that has removed the dealing charge outright. Its guidance states that it is free to buy and sell funds on Freetrade, and that you will not be charged a dealing commission, unlike other platforms⁵. The same page confirms that Freetrade will not charge you to hold mutual funds, meaning more of your money stays invested⁵. Its mutual funds product page lists dealing commission of £0 per fund trade².

The same approach runs across the rest of the account. Freetrade states that it does not charge commission to buy or sell stocks and ETFs, and that there are no fund holding fees¹. Its ETF page offers over 1,100 exchange-traded funds to invest in commission-free¹¹, and its stocks and shares page describes trading 6,700+ global stocks and ETFs with no commissions⁷. Fractional shares can also be bought and sold commission-free through the app¹².

On the account itself, the flexible stocks and shares ISA is described as commission-free trading with no ongoing account fee, with the qualification that other charges may apply¹³. The Junior ISA carries no account fees and no commissions, with unlimited free trades and low FX fees¹⁴. The Standard plan offers unlimited commission-free trades¹⁵.

Moving in and out is also free at Freetrade's end. The platform states it will not charge you for transferring your holdings into or away from its platform⁵, and that there is no fee to transfer away and close your Freetrade account¹⁶.

Which? has recognised this model, noting that Freetrade, another no-fee platform, received its Great Value endorsement³.

Fund charges and platform fees: what you still pay

The charges that survive a commission-free deal fall into two groups: what the platform charges you for holding an account, and what the fund charges you for managing the money.

On the platform side, Which? sets out the shape of the market. You might be charged each time you buy and sell a share, investment trust or exchange-traded fund, and less commonly for buying and selling traditional funds³. You might also be charged if you transfer investments from one platform to another, though many platforms have scrapped these fees, while others will offer to cover switching fees as an incentive to join them³.

On the fund side, the ongoing charge figure is the annual percentage paid to the fund manager. The Association of Investment Companies notes that the ongoing charge does not include transaction costs, which are the costs paid when a fund manager buys or sells assets⁴. That matters because transaction costs are real money leaving the fund, and they sit outside the figure most often quoted.

Investment trusts behave differently from funds on many platforms. Which? explains that investment trusts are treated by investment platforms in a similar way to shares, so you will likely have to pay one-off fees when you buy and sell trusts, even if fund trading is free¹⁷. A platform that charges nothing to deal a fund may still charge to deal a trust.

Exchange-traded funds sit somewhere between the two. Which? notes that they generally tend to have cheaper on-going charges, though they may incur extra trading fees from investment platforms¹⁰.

There is also a cost to moving investments between accounts. Bed and ISA arrangements, where you sell holdings in a general account and rebuy them inside an ISA, carry the broker's trading fees or commissions if the broker charges them¹⁹.

How to compare the total cost of trading

Comparing two platforms on dealing commission alone will mislead. The dealing charge is one input, and on some platforms it is zero while other charges are higher.

Start with the dealing charge itself. The Association of Investment Companies puts a typical dealing commission at approximately £10 per deal, while noting that this varies considerably⁴. That is the figure a commission-free platform is removing. Hargreaves Lansdown illustrates how the scope of a dealing charge can differ by investment type: its own guidance states that its dealing charge covers shares, exchange traded funds and investment trusts, with no dealing fee on fund dealing²⁰.

Then add the platform charge. Which? describes the two models: a charge each time you buy and sell, or an ongoing platform fee. Freetrade's own fund platform fee is described as ranging from 0% to 0.45% of holdings, capped, with no charge on Freetrade itself⁵.

Then add the fund's own costs, using the ongoing charge figure and remembering that transaction costs sit outside it⁴. Then add tax: stamp duty at 50p per £100 on UK share purchases⁴.

Finally, check the exit. A platform with free dealing but a transfer-out charge can cost more over a long holding period than one with a small dealing fee and free transfers. Freetrade states there is no fee to transfer away and close your account¹⁶.

Where to check a provider and get help

Before opening an account, the platform's own charges page and the key features document for the specific account type set out what it charges. For a SIPP, the key features document is where the platform's own fee terms sit²³.

If a charge appears that was not disclosed, or a fee is taken that you did not authorise, the Financial Ombudsman Service is free and independent, and it costs nothing to complain²⁴. Where it finds instances of unfair or unauthorised fees, it will usually tell the firm to refund the fee, sometimes with interest, refund additional costs incurred, and pay compensation for distress or inconvenience²⁶. Freetrade SIPP complaints may be referred free of charge to the Pensions Ombudsman or alternatively to the Financial Ombudsman Service²³.

For guidance rather than a complaint, MoneyHelper is a free, independent service²⁷, and its support and guidance are free²⁸. Free debt advice services are also available if investment losses have created wider financial pressure³⁰.

Investment protection is separate from charging. The Financial Services Compensation Scheme covers investments, and its guide to investment protection sets out the limits and what counts²⁸. That protection applies to the firm's failure, not to poor performance or to charges you agreed to.