What is the cheapest stocks and shares ISA available? Answering this question used to involve a switcheroo only slightly less cunning than the Princess Bride’s Battle Of Wits .
But no more! Now the answer is easy.
The cheapest stocks and shares ISA is the DIY option from InvestEngine .
Currently that’s the lowest cost stocks and shares ISA on the market because it costs nothing.
Now that’s my kind of price range!
Cheapest stocks and shares ISA: good to knows
InvestEngine’s ISA costs zero for annual fees, dealing charges, FX fees , entry/exit levies and most of the other multi-headed investment costs  that snap at our wallets like a financially-incentivised Hydra . (It’s little known that the Ancient Greek polycephalic snake-beast was on a bonus scheme. Fifty drachma per hero slain.)
The only costs you will pay are the usual Total Expense Ratio / Ongoing Charge management fees that must be borne when investing in any fund, plus trading spreads. So far, so standard.
The platform’s downside is that you can only invest in a restricted range of ETFs and you can only trade at fixed times per day.
Frankly though, I think that’s a reasonable trade-off. Especially because you can easily create a good portfolio from the ETFs available.
Read our full InvestEngine review . We like it. Just make sure you choose the DIY ISA, not the managed one.
Our only concern is how long can the service remain free?
We’ve previously investigated how zero commission brokers  make their money. In InvestEngine’s case, it’s mostly hoping you’ll opt for its managed offering.
Cheap stocks and shares ISA hack
But what if InvestEngine’s prices creep up, or you don’t like their limited pool of ETFs, or want an alternative because you’re concerned about the FSCS investor compensation limit  of £85,000?
In that event let’s recap our cheap stocks and shares ISA hack – it still delivers tax shelter satisfaction for an exceptionally low cost.
Here’s how the hack works:
- You begin by drip-feeding into your stocks and shares ISA  with the best-value percentage-fee broker on the market.
- Once your ISA is full you transfer it to the cheapest flat-fee broker.
- You don’t trade at the flat-fee broker. You only deal for zero commission with your percentage-fee platform.
- In the new tax year, you open a fresh stocks and shares ISA with the percentage-fee broker.
- Rinse and repeat.
You now enjoy a best-of-both worlds deal that takes advantage of the brokerage industry’s niche marketing strategies.
Percentage-fee platforms offer the best terms to small investors. They tend to rake it in once your account swells beyond £25,000 to £50,000. They’re relying on your inertia.
Flat-fee brokers offer good rates to large investors. They hope to make it up in trading fees. They’re relying on high rollers who treat their portfolios like a night at the casino.
You can arbitrage these cost models, provided you’re active in transferring your ISA and then near-comatose once you’ve parked it at your long-stay platform.
Cheap stocks and shares ISA hack in action
Vanguard Investor  offers the cheapest percentage fee stocks and shares ISA.
It charges 0.15% on the value of your assets and zero for trading fees.1 
Were you to drip-feed  your ISA allowance in evenly (£1,666 every month), you’d pay approximately £16 in platform fees for the year.
Leave your assets with Vanguard forever though and it’d keep charging 0.15% until you hit its £375 cap – the point where your account has accumulated £250,000.
But you’re not going to hang around.
Instead, you transfer your ISA to the most convenient flat-fee platform for long-term stashing. There’s a few choices but the cheapest is X-O.co.uk .
It charges a quite reasonable £0 for platform fees.
Dealing commission is a much less competitive £5.95 a throw. But we’re not trading there so we plan to pay pretty much zero pounds to X-O.
Total cost of your stocks and shares ISA per year = £16.
Just transfer your ISA from Vanguard when it’s full, or after you’ve paid in your last contribution during the current tax year.
Open a fresh stocks and shares ISA with Vanguard on new tax year day (6 April) while your old one is lodged with X-O, gratis.
Note that X-O doesn’t do funds. They do stock ETFs though, so make sure your Vanguard portfolio only contains ETFs tradable at X-O before you transfer.
You don’t want to have to sell out of the market and then buy your portfolio again when it arrives at X-O.
Cheapest stocks and shares ISA comparisons
What are the cheapest stocks and shares ISA alternatives to X-O?
Next comes iWeb Share Dealing. It charges a stiff, one-off £100 to open an account. But your ISA platform fees are zero after that.
Amortise those fees across three years and iWeb’s ISA costs £33.33 for three years and then nothing from year four on.
You’d expect to pay £36 a year for your investment ISA at Halifax Share Dealing.
Lloyds Share Dealing costs £40 for your ISA platform fee.
Fidelity caps its ISA platform fee at £45 per annum for ETFs only.
Trades cost extra at all these brokers but you do your buying and selling at Vanguard.
FreeTrade is £59.88 annually. You get as many zero commission trades as you like – so you could skip the Vanguard complexity – but must make the magic happen with a limited palette of ETFs.
Sitting on a £20,000 investment ISA at Vanguard costs you £30 a year alone. Plus another £16 on top as you build up your current tax year’s ISA.
Still, the bottom line is that InvestEngine is the cheapest stocks and shares ISA. The Vanguard-X-O combo places second in most scenarios if you make monthly trades.
The other downside with Vanguard is you’re restricted solely to its funds and ETFs. That’s okay though because it runs excellent, cost-competitive index trackers .
The other main compromise with X-O is its website is medieval (as is iWeb’s). Reviews on the likes of Trustpilot are distinctly average.
X-O and iWeb are bare bones offerings so don’t rock up expecting five star customer service.
I’ve personally dealt with iWeb for many years and found them to be perfectly acceptable.
Note, accounts held with Halifax / Bank Of Scotland, Lloyds Bank, and iWeb count as one for the purposes of the Financial Services Compensation Scheme.
Low cost stocks and shares ISA: alternatives to Vanguard
You could replace the Vanguard leg of the hack with Dodl. That’s AJ Bell’s spin-off app-only brand.
Like Vanguard, Dodl charges 0.15% per annum in platform fees and nowt for trading.
However, your fees would be higher because Dodl charges a £12 minimum fee no matter how empty your account is.
It also features a restricted fund and ETF range, though it’s not Vanguard only.
Close Brothers is your next stop among the percentage-fee brokers. It charges a 0.25% platform fee and zero commission for funds. ETF trades are £9 a pop, with no mercy for regular investors.
If you hate the idea of filling in transfer forms then you can make the entire hack work at a slightly higher cost at Fidelity:
- Buy funds monthly for zero trading fees while racking up platform fees at 0.35% per annum.
- Once you hit the breakeven point, sell your funds and buy as few ETFs as possible to reconstitute your portfolio at £10 a trade.
- Fidelity caps ETF fees at £45 per year.
Using this scheme, there’s no need to worry about which year’s ISA you’re transferring. The entire dosey-doe happens within your Fidelity stocks and shares ISAs.
It works because Fidelity act as a percentage-fee/zero commission broker with funds, and a flat-fee broker with ETFs.
Check out our comparison of ETFs vs index funds .
Tidying up the loose ends
All the cheap stocks and shares ISA options laid out above handle ISA transfers free of charge. Though X-O levies an exit fee should you decide to leave.
You need to transfer your investments in specie (so they’re not sold to cash) to avoid paying dealing fees to your flat fee broker at the other end.
In Specie or re-registration transfers mean you don’t have to worry about being out of the market  either.
Check your new broker offers the same funds and ETFs as your old one.
Invest in accumulation funds  and ETFs from the beginning. This will save you paying to reinvest dividends at the flat-rate broker.
I’ve ignored rebalancing costs once you’re parked up at X-O. A small investor should be able to rebalance with new money . Anyone with an embarrassment of riches can set their rebalancing alarm to once every two or three years. That gives you just as good a chance of being up on the deal as any other rebalancing method .
Or you could invest everything in a Vanguard LifeStrategy  fund. That takes care of rebalancing for you.
Either way, rest assured this manoeuvre does not contravene the stocks and shares ISA rules :
- You can have as many stocks and shares ISAs as you like, so long as you don’t put new money into more than one per tax year.
- Transferring old ISA money or assets does not use up your ISA allowance for the current tax year or break the one-type-of-ISA-a-tax-year rule.
- You can transfer any amount of your previous years’ ISA’s value. You can transfer the whole lot into one ISA, or transfer a portion of it into several ISAs, or any other combo you desire.
For more on stocks and shares ISA transfers .
To calculate your cheapest platform  option.
Our broker comparison  table tracks the UK’s best platforms.
If you truly want the cheapest stocks and shares ISA possible then you’ll need to factor in the cost of the low-cost index funds  and ETFs available on any platform versus those available through Vanguard.
Paying slightly higher OCFs  than necessary could overwhelm your platform fee / dealing fee savings. Be especially vigilant if you have a very large portfolio.
None of this takes into account the value of your time spent filling in forms. Although when you’re getting this anal then maybe that’s a net positive. (A person’s gotta have a hobby!)
Take it steady,
Note: Links to platforms may be affiliate ones, where we may get a paid a small fee if you sign-up. This doesn’t alter the price you pay.
- You pay zero for trading ETFs as long as you accept the fixed daily trading times. [↩ ]