With an ISA or SIPP you have the option of paying fees from the investment account itself, or from your bank account.

Which is the better option financially?

Fees may not be huge, but they do make a difference to long term growth. This means you want to pay the fees in the most efficient way.

The best way to pay investment fees depends on the wrapper you’re using — and getting it right improves long-term returns without taking extra risk.

This differs between an ISA and SIPP, so lets take a look at the reasons why, and where you should pay these fees from.

ISA – Pay fees from your bank account

Because contributions to your ISA don’t get tax relief, every pound you have invested in your ISA is precious tax-free money.

If fees are taken from your ISA, you’re permanently reducing the money in that pot. This counts against what you can invest in your ISA each year.

By paying ISA fees from your bank account instead, you’re effectively protecting your £20,000 annual allowance and keeping more money compounding tax-free.

Your best option, therefore, is to pay ISA fees from your bank account.

SIPP – Pay fees from your investment account

With a SIPP, especially via salary sacrifice, it’s usually more efficient to let the fees be taken directly from the pension.

This is because the money going into your SIPP is pre-tax, while money in your bank account has already been hit by income tax (and National Insurance).

If you pay SIPP fees from your bank account, you’re using taxed money to cover a cost that could have been paid with untaxed income.

Letting your SIPP handle its own fees is effectively cheaper — often by 20% to 45% depending on your tax band.

This makes paying fees directly from your SIPP the more efficient choice overall.

Summary: Should You Pay Investment Fees From Your Bank Account, ISA or SIPP?

In short:

• SIPP: Let fees come out of your SIPP. If you use salary sacrifice, fees are paid with pre-tax money, making them effectively cheaper.
• ISA: Pay fees from your bank account. This protects your £20,000 annual allowance and keeps more money compounding tax-free.
• Bank account vs wrapper: Using cash to pay ISA fees increases tax efficiency, while using the SIPP to pay its own fees avoids paying them with already-taxed income.

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