# Hidden costs when investing… and how not to get hit Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-11-30 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: Avoid Hidden Investment Fees: Tips from ETX Capital Meta Description: Discover how UK investors are unwittingly paying up to six times more in fees than advertised. Learn how to avoid common hidden charges with insights from ETX URL: https://financedigest.com/hidden-costs-when-investing-and-how-not-to-get-hithtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/a-young-man-with-money-on-his-mind-a-great-image-to-illustrate-unemployment-or-stock-i-sbi-301045447-1736836786889-compressed.jpg) _By Annie Charalambous, Head of Communications at_ [_ETX Capital_](https://www.etxcapital.com/en-gb/home) According to recent figures, Brits plan to increase their investments by [almost a fifth](https://home.barclays/news/press-releases/2021/07/retail-investing-boom-continues--average-investor-to-increase-in/) in the wake of the COVID-19 pandemic – with Gen-Z traders most keen to jump on the markets. But are those looking to boost their profits paying over the odds without realising? A recent study claims UK investors often pay [up to six times more in fees](https://www.telegraph.co.uk/investing/funds/exposed-investment-funds-hidden-costs-five-times-higher/) than advertised, costing some traders up to tens of thousands of pounds long-term. ETX Capital is committed to shining a light on common hidden fees that can trip up new traders. Here’s how you can avoid feeling the pinch. **Taxing times** New traders are often unaware that profits made on their stocks and shares are subject to tax, in the same way they pay tax on [salary earnings](https://www.financedigest.com/billionaires-salary-how-long-does-it-take-for-them-to-earn-your-wage.html "‘Billionaires Salary: How long does it take for them to earn your wage?’"). If your [investment earnings are over £12,300 in a single year](https://www.financedigest.com/liverpools-new-chinatown-perfectly-positioned-for-property-investment-this-chinese-new-year.html "Liverpool’s New Chinatown perfectly positioned for property investment this Chinese New Year"), you will have to pay Capital Gains Tax. This will either be 10 or 20 percent, depending on your annual [income tax](https://www.financedigest.com/the-sixteenth-amendment-and-income-tax.html "The Sixteenth Amendment And Income Tax") band. However, married couples can ‘pool’ their tax-free allowance – meaning they can collectively earn up to £24,600 in trading [profits each year without contributing Capital Gains Tax](https://www.financedigest.com/spain-readies-new-tax-on-electric-utilities-profits.html "Spain readies new tax on electric utilities’ profits"). Some alternative [savings vehicles](https://www.financedigest.com/saving-money-using-vehicle-tracking.html "Saving money by using vehicle tracking") also offer a larger tax-free allowance. For example, you can stash up to £20,000 each [year in an ISA](https://www.financedigest.com/twenty-four-percent-of-18-to-24-year-olds-dont-know-what-an-isa-is.html "Twenty-four percent of 18 to 24 year olds don’t know what an ISA is") and earn interest on your cash. For those looking to diversify their portfolio, many gold and silver coins are also exempt from Capital Gains [Tax as they are technically legal British](https://www.financedigest.com/equinor-evaluating-impact-of-british-windfall-tax-on-projects.html "Equinor evaluating impact of British windfall tax on projects") currency. **Commission costs** As with any commercial service, fund managers and [platform providers](https://www.financedigest.com/newly-launched-quintessential-to-provide-prestige-living-management-platform-for-prs.html "Newly launched Quintessential to provide ‘prestige living’ management platform for PRS") that help traders set up and manage their investments will charge fees for their service. However, the size of these costs can [catch out unsuspecting investors](https://www.financedigest.com/dollar-catches-breath-while-investors-await-midterms-cryptos-skittish.html "Dollar catches breath while investors await midterms; cryptos skittish"). According to research, commission costs average [1.03 percent](https://www.thetimes.co.uk/article/why-are-investment-fund-fees-so-much-lower-in-the-us-h8jmrm7g6) in the UK – around double the equivalent fees in the US. While these costs are unavoidable for those who [need support managing their investment](https://www.financedigest.com/5-reasons-why-women-need-to-get-into-property-investing.html "5 Reasons why women need to get into property investing") funds, it is possible to reduce them. Research [investment platforms and fund managers to ensure you find the most cost-effective commissions for your assets](https://www.financedigest.com/french-watchdog-fines-h2o-asset-management-executives-over-tennor-investments.html "French watchdog fines H2O Asset Management, executives over Tennor investments"). Alternatively, you may be able to [avoid commission if you have the knowledge of the markets and are comfortable with the risk](https://www.financedigest.com/how-to-avoid-the-risks-of-poor-credit.html "How To Avoid the Risks of Poor Credit"). If so, there are plenty of accessible [platforms that will educate you on how to manage your stocks](https://www.financedigest.com/stock-trading-platforms-for-beginners.html "Stock Trading Platforms for Beginners"), forex, commodities and more. Although, [keep in mind that you’ll likely have to pay fees to trade](https://www.financedigest.com/commodities-trading-houses-help-keep-russian-oil-flowing.html "Commodities trading houses help keep Russian oil flowing") on these platforms. [**Not** **_that_** **Stamp Duty**](https://www.financedigest.com/make-it-a-budget-for-businesses-abolish-stamp-duty-on-private-share-transactions.html) All stocks bought in the UK valued at £1,000 and over are subject to [Stamp Duty](https://www.financedigest.com/bellway-pays-stamp-duty-at-mascalls-park.html "Bellway Pays Stamp Duty At Mascalls Park") Reserve Tax (SDRT). At 0.5 percent of the asset price, this can soon add up. This [tax is usually absorbed as part of a total fee charged by a fund](https://www.financedigest.com/uk-drops-plan-to-tax-sovereign-wealth-funds.html "UK drops plan to tax sovereign wealth funds") manager. However, if you manage your own investments, you’ll need to submit details of your assets to the [government in good time to skip late payment](https://www.financedigest.com/exxon-chevron-conceal-payments-to-some-governments-watchdog.html "Exxon, Chevron conceal payments to some governments -watchdog") fines. While SDRT [marks a relatively small fee compared to the rewards on offer for successful investors](https://www.financedigest.com/mark-lyttleton-what-is-an-angel-investor.html "Mark Lyttleton: What Is an Angel Investor?"), many may still wish to diversify their portfolios to avoid mounting tax bills. A common example is adding [corporate bonds](https://www.financedigest.com/green-bonds-are-set-to-drive-corporate-esg-debt-out-of-slump-in-2023-barclays.html "Green bonds are set to drive corporate ESG debt out of slump in 2023 -Barclays"), which are exempt from SDRT. **Farewell feels** Many budding [investors starting their trading journey simply](https://www.financedigest.com/digbeth-is-simply-divine-to-young-urbanites-and-investors-alike.html "Digbeth is simply Divine to young urbanites and investors alike") aren’t thinking about what happens when you withdraw funds or transfer them to another platform. And for some, this means getting hit with unexpected ‘exit fees’. These charges are typically written into the terms and conditions of an investment service and while many platforms and brokers have recently [agreed to waive exit fees](https://www.yourmoney.com/investing/hargreaves-lansdown-to-scrap-controversial-exit-fees/), there are still plenty leaving traders with a shock when the time comes to withdraw cash. Exit fees are usually charged as a percentage fee of the withdrawn sum, which can represent a significant [cost for longer-term investors](https://www.financedigest.com/preventing-poor-esg-practices-from-costing-you-investors.html "Preventing poor ESG practices from costing you investors"). It’s important to check for exit fees, which may also be referred to as ‘redemption fees’, before signing up for a platform or [partnering with a fund manager](https://www.financedigest.com/reckon-software-goes-from-strength-to-strength-with-appointment-of-new-partner-development-manager.html "Reckon Software goes from strength to strength with appointment of new Partner Development Manager"). And those looking to escape these charges should look for providers that simply don’t apply them in the first place – or at least check the expiry date. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---