How to buy shares in the UK

Last updated: 17.05.2021
Taso Anastasiou
Author:
Taso Anastasiou
Adviser
CFD & Trading
Experience
> 20 years

Across the world, the stock market has become an increasingly popular form of investment.  Many more UK traders now find they have access to stockbrokers who provide a digital interface that allows them to trade entirely online.

The London Stock Exchange (LSE) is the usual source of shares for most UK stockbrokers, but many offer global opportunities as well.  As an investor, you will also benefit from the protection of the Financial Conduct Authority (FCA), which is recognised as one of the most stringent licensing authorities in the world.

In this guide we will cover:

  • How the UK licences and regulates stockbrokers 
  • The impact of fees and taxes for stock traders
  • Tips for choosing a stockbroker that suits your needs
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  • Availability of buying shares
  • How to buy shares
  • UK licensing and security
  • Trading stocks fees and costs
  • How to buy shares: UK investors
  • Finding the right stockbroker
  • How to buy shares in the UK

Availability of buying shares

Thanks to considerable advances in technology, mobile devices and more reliable ways to access the Internet, stock trading in the UK has become much more accessible in the last decade. The world of stock trading is now open to almost anyone with a suitable device and a sound Wi-Fi or network connection.

Whilst it is unlikely you will have any difficulties accessing your broker’s platform from a desktop PC, if you plan to trade mostly on the move, then it is essential to find a broker that provides an advanced mobile app as well. There is still a level of inconsistency between stock trading apps, so it is certainly worth checking in advance which brokers can provide the level of functionality you are going to need.

How to buy shares

So, how to buy stocks UK? First things first, the one thing you cannot do without is a stockbroker, because only corporate members of a stock exchange are permitted to trade there.

You are also likely to find that stockbrokers work in a different way to other online trading platforms and offer different levels of service to clients. All will have a unique fee structure too. The three main levels of service you are likely to encounter are:

Execution-only

This category is the ‘self service’ version for traders who are happy and comfortable making investment decisions and implementing them. It is in this category that you would find free stock trading UK opportunities, which means that although you won’t pay commission, you will still incur some other types of fees. Always check that your broker has made these clear in advance to avoid a nasty surprise.

Advisory

At an advisory level, you will have your own experienced portfolio manager who is qualified to provide you with financial advice associated with the suitability or risk attached to any investment. This financial advice may also extend to planning your trading strategy, although not in all cases. What it does not include is making decisions on your behalf, you always get the final say.

Discretionary

You will often see this option described as ‘full-service brokerage’. Basically, you hand the reins over entirely to your stockbroker, who does everything for and lets you know regularly about how your investments are doing. This type of stock trading will cost you around 10% of your total portfolio value per annum for the privilege.

UK licensing and security

The world-renowned Financial Conduct Authority (FCA) is the UK’s licensing and regulatory body for all things financial, including stockbrokers.  It was established in 2013 following the Financial Services Act (2012) and replaced the now-defunct Financial Services Authority (FSA). 

The FCA has a robust regulatory framework and works towards these operational objectives:

  • To secure an appropriate degree of protection for consumers
  • To enhance market integrity and protect the UK financial system
  • To promote competition in the interests of consumers

There are many excellent UK-regulated stockbrokers to choose from and for the average trader, really no good reason to look beyond them.

Stockbrokers all work differently and the ways they charge clients can be very different as well. As you have already seen, there are a variety of account options available, varying from self-service to full service. Let’s take a look at the fees on hand when trading online.

Trading stocks fees and costs

Fees

Regardless of the description the broker uses, it is a business after all, which must cover its costs and show a profit, so there will always be fees of some sort to pay. A commission-free brokerage will still charge you for certain services, including administration, currency exchange, deposit/withdrawal and software subscriptions.

As we explained earlier a full-service broker charges an all-inclusive fee, calculated as a percentage of your total portfolio value which usually equates to about 10%, payable monthly or quarterly. The middle, advisory option varies in terms of cost to maintain and may just be something you are offered free of charge as an added incentive if your portfolio is suitable.

Taxation

In the UK, there are two taxes applicable to stock trading, Capital Gains Tax and Income Tax, which are both administered by HMRC (Her Majesty’s Revenue and Customs. Your liability will depend on whether you are classed as an ‘investor’ or a ‘trader’, based on any profit you make over and above the tax-free threshold. Tax for stock traders is a complex subject in the UK and we recommend that you keep accurate accounts related to all trading activities and consult an accountant if you have any doubts.

How to buy shares: UK investors

The focal point of most UK stockbrokers is inevitably the London Stock Exchange (LSE) and you will find that the majority will offer better deals for stocks available from that source. If you are happy sticking to investing in FTSE 100 companies then that is fine, but if you want to get involved with more global markets, they are readily available too.

A surprising number of UK stock traders have a preference for blue-chip stocks, which tend to come at a higher share price but are also representative of companies that are renowned for their financial stability as well as their propensity for dishing out high annual dividends to shareholders.

Three of the best-known NASDAQ-GS listed blue-chip shares currently available are Amazon Tesla and Apple. So here is a brief rundown on those three:

Amazon

Amazon is a particularly intriguing company and it is clear that its shares do not particularly conform to its stock sector tag of Consumer Discretionary, tending to trend more in line with the Information Technology sector. This is most likely because of its ever-expanding AWS cloud-computing component and the various other technological pies it has its fingers in.

However, something we can tell you is that to buy Amazon shares, UK investors will pay somewhere in the region of $3000 per share, following on from consistent increases in the share price throughout 2020.

Tesla

Tesla is very similar to Amazon in some respects. It is classified under the same Consumer Discretionary stock sector and its share behaviour has followed similar market trends to those in the IT sector.

Some say it is in the wrong sector, but regardless of where it belongs, to buy Tesla shares, UK traders will pay £661 per share at today’s prices, a somewhat massive jump from the $91 cost per share of twelve months ago.

Apple

There are some businesses that always buck the trends and do well regardless of any outside influences and Apple seems to be one of those that always seem to come up smelling of roses.

There is never a good or bad time to buy Apple shares, UK share traders have discovered. It always seems to be a good investment, which has held steady at the $130 per share level for many months, despite the events of 2020 and all it could conspire to throw at the economy.

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Finding the right stockbroker

It is entirely understandable that more experienced traders might opt for an offshore brokerage, due to the potential for tax savings.  But the onus really is on the word experienced here.  Before you start counting the extra profit, please be aware that some overseas licensing authorities offer little protection for investors under their jurisdiction.  

Otherwise, UK stockbrokers come in a variety of shapes and sizes, offering various share purchasing opportunities and several different types of account.  All you need to do is to find the one that is closest matched to your needs and of course, your budgetary constraints.

It’s important that you find an online broker that caters to all your trading needs. There’s no need to settle for a sub-par broker that does not provide the services you are after. As such, we’ve tailored a platform that caters to a range of different traders. Finding a top-notch platform should not be a hassle!

How to buy shares in the UK

Finding the right stockbroker is by no means an easy task, it takes time, patience and plenty of research.  However, investing in UK shares can be a very rewarding trading option, provided that you are willing to put in consistent hard work and keep up with the global economic and political influences that can easily affect your portfolio’s balance.

Please take some time to browse through our guides and carefully curated broker reviews.  You will find that they provide straightforward reading, designed to cover all of the most important aspects of stock trading and our honest opinions on the UK’s selection of stockbrokers. 

How to buy shares in the UK FAQs

❓Should I stick with a UK stockbroker, or go offshore for the tax saving?

Stock trading is a legitimate form of trading in the UK and if you opt for an FCA-regulated stockbroker, your investment is guaranteed to be kept safe.  Some offshore brokers also offer services to UK traders, but if they are not FCA licensed, you will not have the same level of protection.  Find out more by reading our stock trading guides and broker reviews.

💰 What fees will my broker charge me?

Stockbrokers will apply fees to your account, but their structures vary.  To find out what you might expect to pay your stockbroker, read our guides to buying stocks and shares in the UK.

💹 Do stockbrokers have demo platforms?

While more brokers are now offering stock trading simulators, it is not yet prevalent in this trading marketplace.  To find out everything you need to know about buying UK shares, check out our guides, where you will find nothing but up-to-the-minute relevant information.

📞 What about mobile trading?

More UK brokers are now offering mobile access to your stock trading account, but the functionality of mobile apps between brokers can vary considerably, a subject we cover in our stock trading guides and all of our broker reviews.

🌏 Should I buy UK stocks, or are US shares better value?

Apart from the fact that UK-based stockbrokers promote UK businesses and shares, it simply comes down to your own preferences and which stocks happen to interest you more.  Reading our stock trading guides will give you a better idea on how to select the best assets to trade and why.

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