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How to Buy Shares UK – Comprehensive Guide

Tobi Opeyemi Amure
Reviewed by:
How to Buy Shares UK

Are you interested in buying shares in the UK?

My comprehensive guide will walk you through the process step by step.

From selecting a trading platform to managing your investment portfolio, I’ve got you covered.

This article was reviewed by Tobi Opeyemi Amure, an investing expert and writer at InvestopediaInvesting.com, and Trading.biz.

How to Buy Shares in 6 Simple Steps

To buy shares in the UK, follow these steps:

  1. Research and educate yourself: Understand the basics of investing, different types of shares, and market trends.
  2. Choose a trading platform: Select a reputable trading platform or broker that suits your needs, offers a user-friendly interface, and provides access to UK markets. See my comprehensive guide to the best trading platforms UK.
  3. Open a trading account: Complete the application process, including identity verification and funding your account.
  4. Research and select shares: Analyse companies, review financials, and consider factors like growth potential, dividends, and industry trends.
  5. Place your order: Determine the number of shares you want to buy and the price you are willing to pay, then submit your buy order through the brokerage platform.
  6. Monitor and manage your portfolio: Keep an eye on your investments, track performance, and stay informed about market developments and company news.

Best Trading Platforms to Buy Shares in the UK

Here’s my list of the best places to buy shares in the UK.

1. eToro – Best overall & for copy trading

eToro is a popular online trading platform that offers an easy and convenient way to buy shares in the UK.

With eToro, you can access a wide range of stocks listed on UK exchanges, including FTSE 100 and AIM-listed companies.

The platform provides a user-friendly interface, social trading features, and a unique CopyTrader feature, allowing you to follow and automatically replicate the trades of successful investors.

Additionally, eToro offers a free virtual trading account for practice and a variety of educational resources to support your investment journey.

They have an ‘Excellent’ rating on Trustpilot (which is quite rare for a trading app), with over 18,000 reviews.

eToro Trustpilot review.
  • Fees: Commission-free trading, $5 withdrawal fee, $10 inactivity fee, currency conversion fees
  • Minimum balance: £10
  • Instruments: Stocks, Index CFDs, ETF CFDs, Investment Trusts, Forex, Crypto and Commodities.

Read my eToro review UK.

Pros:

  • No trading or platform fees
  • Sophisticated & advanced trading tools
  • Social & copy trading features
  • Versatile trading options: online or app

Cons:

  • Inactivity fee policy
  • A high withdrawal fee of $5

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2. Freetrade – Best for free share upon signup

Freetrade is a popular platform that enables individuals to buy shares in the UK with ease.

With its user-friendly mobile app, Freetrade provides access to a wide range of stocks listed on the London Stock Exchange and other international exchanges.

The platform offers commission-free trading, making it affordable for investors of all levels.

Freetrade also provides investment research tools, market data, and a community forum for users to interact and share insights.

Whether you’re a beginner or an experienced investor, Freetrade offers a convenient and cost-effective way to invest in shares in the UK.

  • Fees: Commission-free trading on all stocks, shares and ETFs
  • Minimum balance: £0
  • Instruments: ‍Stocks, ETFs, and Investment Trusts.

Read my Freetrade review UK.

Pros:

  • Commission-free trading
  • User-friendly & intuitive interface
  • Range of investment options

Cons:

  • Limited research tools
  • Inactivity fee

3. interactive investor – Best for a large selection of investment options

Interactive investor is a well-established platform renowned for its comprehensive offering to buy shares in the UK.

With a wide range of investment options, including shares, funds, and trusts, Interactive Investor provides access to over 40,000 UK and global stocks.

The platform offers competitive pricing plans tailored to different trading frequencies, along with a wealth of research tools, market insights, and educational resources.

Interactive investor also stands out with its customer service and user-friendly interface, making it a popular choice for both experienced investors and beginners looking to invest in shares in the UK.

  • Fees: £5.99 per trade, annual custody fee starting at £4.99, £40 bonds fee
  • Minimum balance: £0
  • Instruments: ‍Stocks, Bonds, Funds, ETFs, and Investment Trusts.

Read my interactive investor review UK.

Pros:

  • Widely available investment options
  • Seamless trading channels
  • Offers special features like limit orders, stop loss, etc.

Cons:

  • Outdated website design
  • Highest foreign exchange fee – 1.5% per international transaction

Common Questions About Purchasing Shares

Here are my answers to some of the most frequently asked questions regarding share buying in the UK.

What Is a Share?

A share represents ownership in a company.

By purchasing a share, an investor becomes a partial owner and can potentially benefit from the company’s profits and growth.

Shares are typically bought and sold on stock exchanges, and their value can fluctuate based on various factors such as market conditions, company performance, and investor sentiment.

Investing in shares allows individuals to participate in the potential success of businesses and potentially earn returns through dividends and capital appreciation.

There are numerous methods to determine a company’s share value, including the Gordon Growth Model and calculating the Price/Earnings ratio. 

A low P/E ratio signifies that an investor buying the stock is receiving an attractive amount of value. A share’s value doesn’t remain fixed. It might skyrocket today and drop tomorrow. 

Generally, investors acquire shares with the belief that the company’s success will drive up its value in the future.

Is Every Company Listed on a Stock Exchange?

No, not all companies are listed on a stock exchange.

Companies have the option to go public and list their shares on a stock exchange, which allows them to raise capital by selling shares to the public.

However, many companies choose to remain privately owned and operate without being listed on a stock exchange.

Private companies are not traded publicly, and their shares are not available for purchase or sale on a stock exchange.

Private ownership offers companies greater control over decision-making and may be preferred by certain businesses or individuals.

The London Stock Exchange, a primary exchange market in the UK, is a treasure trove of major companies and household names.

An alternative to this is the Alternative Investment Market (AIM), where you can purchase shares from promising small entities. 

Benefits of Listing a Company on the Stock Exchange?

Listing a company on the stock exchange offers benefits such as increased access to capital, enhanced liquidity for shareholders, improved public visibility, the potential for growth through acquisitions and mergers, and the ability to incentivise employees through stock-based compensation.

Who Is Eligible for Buying Shares?

There are no set criteria. Shares could be owned by anyone. Typically, two types of people own a share:

  1. Individual Ownership: Become the proud sole owner of shares, where you have the ultimate control of investments.
  2. Group Investment: Pool your resources with fellow investors, forming a fund to collectively mitigate risks and maximise opportunities—a truly powerful way to own shares.

Should I Invest in Shares or Funds?

The decision to invest in shares or funds depends on your individual financial goals, risk tolerance, and investment preferences.

Investing in shares allows you to directly own individual stocks of companies, providing the potential for higher returns but also higher risk.

It requires more research and monitoring of individual companies.

On the other hand, investing in funds (such as mutual funds or exchange-traded funds) offers diversification by pooling money from multiple investors to invest in a portfolio of stocks or other assets.

Funds are managed by professionals who make investment decisions on behalf of the investors.

This can provide broader market exposure, lower risk through diversification, and convenience in terms of professional management.

Consider factors like your investment knowledge, time availability, risk tolerance, and diversification preferences when deciding between shares and funds.

Many investors opt for a balanced approach by combining both shares and funds in their investment portfolios to achieve a diversified and personalised investment strategy.

Consulting with a financial advisor can also help in making the best decision based on your specific circumstances and goals.

Perks of Investing in a Fund

A fund is defined as a collection of money from different people. It is usually managed by high-market professionals which comes with several benefits. 

  • Expertise in Professional Portfolio Management: Funds are entrusted to seasoned professionals who possess a deep understanding of how the market operates. These skilled managers actively navigate the complex investment landscape. They analyse market trends, identify opportunities, and make informed decisions on your behalf.
  • The Power of Diversification: When you pool money from numerous investors, you shield yourself from unsystematic risks. Hence, even if one company faces challenges, the collective power of other holdings mitigates your risks by spreading it across assets.
  • Dividend Reinvestment for Compounding Growth:  As companies give off dividends, funds have the flexibility to reinvest these earnings. This process significantly boosts your growth potential by acquiring additional shares. In the longer run, the compounding effect can enhance the long-term value of your investment.

How Can Investing in Shares Make (Or Lose) Me Money?

Investing in shares can potentially make or lose you money through the following mechanisms:

  1. Capital appreciation: If the value of the shares you own increases over time, you can make a profit by selling them at a higher price than what you initially paid. This is known as capital appreciation.
  2. Dividends: Some companies distribute a portion of their profits to shareholders in the form of dividends. By owning shares in such companies, you can earn regular dividend income, providing an additional source of potential returns.
  3. Stock splits and bonus issues: Companies may split their shares or issue bonus shares to existing shareholders, effectively increasing the number of shares you own without additional investment. This can potentially increase the value of your investment.

Conversely, investing in shares also carries the risk of losing money:

  1. Market fluctuations: Share prices can be volatile and influenced by various factors such as economic conditions, company performance, industry trends, and investor sentiment. If the value of your shares declines, you may experience a loss if you sell them at a lower price than what you initially paid.
  2. Company-specific risks: Individual companies may face specific risks such as financial difficulties, management issues, or regulatory challenges, which can adversely affect the value of their shares.

It’s important to note that investing in shares involves risk, and there are no guarantees of making money.

It requires careful research, diversification, and a long-term investment approach to potentially mitigate risks and increase the likelihood of positive returns.

Consulting with a financial advisor or conducting thorough analysis before making investment decisions can help in managing risks and maximising potential gains.

Should I Buy Shares?

Deciding whether to buy shares is a personal choice that depends on various factors, including your financial goals, risk tolerance, investment timeframe, and knowledge of the stock market.

Here are a few points to consider:

  1. Financial goals: Determine your objectives for investing. Are you seeking long-term growth, generating income through dividends, or aiming for short-term gains? Clarifying your goals can help guide your decision.
  2. Risk tolerance: Understand your comfort level with risk. Investing in shares carries inherent risks, including the potential for loss of capital. Consider whether you can handle fluctuations in share prices and the possibility of temporary declines.
  3. Time horizon: Assess your investment timeframe. Investing in shares is typically more suitable for long-term goals, as short-term market fluctuations can impact returns. If you have a longer time horizon, you may be more willing to ride out market volatility.
  4. Research and knowledge: Evaluate your understanding of the stock market and individual companies. Conduct thorough research, stay informed about market trends, and analyse company fundamentals before making investment decisions.
  5. Diversification: Consider diversifying your investments across different sectors, industries, and asset classes. This can help spread risk and potentially enhance returns.

It’s important to note that investing in shares carries uncertainties, and past performance does not guarantee future results.

Ultimately, the decision to buy shares should align with your financial goals, risk tolerance, and investment strategy.

What to Consider Before You Buy Shares in a Company?

Before buying shares in a company, consider the following factors:

  1. Company’s financial health: Evaluate the company’s financial statements, including revenue, profitability, debt levels, and cash flow. Look for consistent growth, strong financial ratios, and a sustainable business model.
  2. Industry and market analysis: Assess the company’s industry position, competition, and market trends. Understand the potential risks and opportunities associated with the industry’s dynamics.
  3. Management and leadership: Research the company’s management team and their track record. Look for experienced leaders with a clear strategic vision and a history of delivering results.
  4. Competitive advantage: Determine if the company has a unique competitive advantage, such as proprietary technology, strong brand recognition, or barriers to entry that give it an edge over competitors.
  5. Growth prospects: Analyse the company’s growth potential. Consider factors such as expansion plans, innovation, market demand, and new product offerings that may drive future growth.
  6. Dividends and shareholder returns: Assess if the company pays dividends and its history of dividend growth. Evaluate the company’s commitment to rewarding shareholders through dividends or share buybacks.
  7. Risk assessment: Identify and evaluate potential risks associated with the company, such as regulatory changes, industry disruptions, legal issues, or geopolitical factors. Understand the risks and determine if you are comfortable taking them.
  8. Valuation: Consider the company’s valuation in relation to its peers and the overall market. Evaluate key valuation metrics like price-to-earnings (P/E) ratio, price-to-sales (P/S) ratio, and other relevant measures to assess if the shares are reasonably priced.
  9. Diversification: Keep in mind the importance of diversification in your investment portfolio. Avoid overconcentration in a single stock or sector to mitigate risk.

How Do I Know What Shares to Buy?

I don’t provide specific recommendations on which shares to buy, as investment decisions should be based on thorough research and individual circumstances.

However, there are reputable platforms and resources available that can assist you in your research.

Some sites that offer insights, news, and discussions on shares include ADVFN, Hargreaves Lansdown, Interactive Investor, Motley Fool, and Citywire.

These platforms can provide valuable information and analysis to help you make informed investment decisions.

Additionally, seeking independent financial advice is recommended if you are unsure about investing or need personalised guidance based on your financial goals and risk tolerance.

What Is the Cost of Share Dealing?

The cost of share dealing can vary depending on the brokerage or platform you choose.

Here are some common costs associated with share dealing:

  1. Commission Fees: Many platforms charge a commission fee for each share trade you make. The commission can be a fixed amount or a percentage of the transaction value.
  2. Stamp Duty: In the UK, stamp duty is levied on share purchases. Currently, stamp duty on UK share purchases is set at 0.5% of the transaction value.
  3. Spread: When trading shares, you may encounter a bid-ask spread. The spread represents the difference between the buying price (ask price) and the selling price (bid price). This spread cost can impact your overall trading expenses.
  4. Platform Fees: Some brokers may charge platform fees for accessing their trading platform or maintaining an account. These fees can be a monthly or annual charge.
  5. Currency Conversion: If you are trading shares denominated in a different currency than your account’s base currency, you may incur currency conversion fees or charges.

It’s important to thoroughly research and compare the costs of different brokers or platforms before choosing one.

Consider your trading frequency, the size of your trades, and any additional services or features provided by the broker.

Understanding the costs involved can help you evaluate the overall affordability and potential impact on your investment returns.

Is It Safe to Trade Shares Online?

Trading shares online can be safe if you take the necessary precautions and choose reputable brokers or trading platforms.

Here are some factors to consider for ensuring a safe trading experience:

  1. Regulation: Verify that the broker or platform you choose is regulated by a reputable financial authority. Regulatory bodies provide oversight and enforce certain standards to protect investors.
  2. Security Measures: Look for brokers or platforms that prioritise strong security measures, such as two-factor authentication, data encryption, and secure login protocols. This helps protect your personal and financial information.
  3. Investor Protection: Check if the broker or platform is a member of an investor protection scheme. These schemes provide compensation or protection in case the broker goes bankrupt or fails to meet its obligations.
  4. Research and Due Diligence: Conduct thorough research on the broker or platform before opening an account. Read reviews, check their reputation, and ensure they have a track record of reliable and trustworthy service.
  5. Terms and Conditions: Carefully review the terms and conditions, including the policies on data protection, account security, and dispute resolution. Understand the fees and charges associated with trading.
  6. Education and Support: Opt for platforms that provide educational resources, customer support, and prompt assistance. A reliable broker should be responsive to your queries and provide guidance when needed.
  7. Secure Payment Methods: Ensure that the broker or platform offers secure payment methods for funding your account and withdrawing funds. Use trusted and encrypted payment gateways.

By taking these precautions and being cautious with your personal information, you can minimise the risks associated with online share trading.

It’s essential to stay vigilant, keep your software and devices updated, and follow best practices for online security to protect your investments.

Who Really Owns the Shares?

When using a platform to buy shares, it’s important to understand that the shares are typically legally owned by the platform itself or a nominee company.

As a result, you become a beneficiary owner of the shares.

While this arrangement allows you to purchase fractional shares and access shares that may otherwise be expensive, it means that in the unlikely event of the platform collapsing, you may not have direct control over your shares.

In such cases, your assets, such as shares or funds, would either be transferred to another broker or sold, with the cash proceeds returned to you.

To mitigate this risk, most platforms practice ringfencing, keeping your assets separate from their own, thereby providing some protection even in the event of the platform’s bankruptcy.

How to Sell Shares

To sell shares, you can follow these general steps:

  1. Choose a Broker: If you don’t already have a brokerage account, select a reputable UK stock broker that offers share trading services. Ensure they support the shares you wish to sell.
  2. Access Your Trading Account: Log in to your trading account using the broker’s online platform, mobile app, or any other designated method of access.
  3. Locate the Shares: Find the section or menu that displays your holdings or portfolio. Identify the specific shares you want to sell.
  4. Select “Sell” or “Trade”: Click on the option to sell or trade the shares you’ve chosen for sale. It may be labeled as “Sell,” “Trade,” or a similar term.
  5. Specify Order Details: Enter the necessary details, including the number of shares you wish to sell and the type of order you want to place. You can choose between market orders (executed at the prevailing market price) or limit orders (set a specific price at which you want to sell).
  6. Review and Confirm: Double-check the order details, including the quantity, price, and any applicable fees or commissions. Ensure everything is accurate before proceeding.
  7. Place the Order: Once you’re satisfied with the order details, submit the sell order. The broker will process your request, and your shares will be listed for sale on the market.
  8. Monitor the Sale: Keep an eye on the market activity to track the progress of your sell order. The execution of the order depends on market conditions and the availability of buyers for the shares.
  9. Settlement and Proceeds: After the shares are sold, the transaction will go through a settlement process, typically taking a few business days. Once settled, the proceeds from the sale, minus any fees or commissions, will be credited to your trading account.

It’s important to note that the specific steps and options may vary slightly depending on the brokerage platform you use.

Familiarise yourself with your broker’s interface and follow their instructions to ensure a smooth selling process.

If you’re uncertain or need assistance, contact your broker’s customer support for guidance.

When Should I Sell My Shares?

Determining the optimal timing to sell shares requires careful consideration of multiple factors.

If I knew the exact answer, I’d be a millionaire! Things you can look at though:

Investment Objectives: Evaluate whether your investment goals have been achieved or if they have changed over time. Selling shares may align with your objectives if they have reached a target price or provided satisfactory returns.

Fundamental Analysis: Continuously assess the financial health, performance, and future prospects of the company in which you hold shares. If there are negative changes in the company’s fundamentals or industry landscape, it may be prudent to consider selling.

Market Conditions: Stay informed about broader market trends, such as overall market valuations, economic indicators, and investor sentiment. Selling shares could be considered if there are signs of an overvalued market or if you anticipate a market downturn.

Risk Management: Regularly review the risk profile of your investment portfolio. If a particular stock becomes excessively dominant or poses a significant risk, selling shares can help rebalance your portfolio and manage risk exposure.

Personal Circumstances: Consider any changes in your financial situation, liquidity needs, or long-term goals. Selling shares might be necessary if your circumstances have evolved or if the proceeds could be better utilised elsewhere.

Is Share Buying Taxed in the UK?

Yes, share buying is subject to taxation in the UK. The specific taxes applicable to share purchases include:

  1. Stamp Duty Reserve Tax (SDRT): When you buy shares in a UK company, you are generally required to pay SDRT. The current rate is 0.5% of the transaction value, and it applies to purchases of shares traded on recognised stock exchanges.
  2. Capital Gains Tax (CGT): If you sell shares and realise a capital gain (the difference between the sale price and the purchase price), you may be liable to pay CGT. The tax rate depends on your overall income and gains.
  3. Dividend Tax: If you receive dividends from shares you own, these dividends may be subject to dividend tax. The tax rates depend on your income tax band, with basic-rate taxpayers paying 7.5%, higher-rate taxpayers paying 32.5%, and additional-rate taxpayers paying 38.1% on their dividend income.

It’s important to note that tax regulations may change over time, and it’s advisable to consult with a tax professional or refer to the official HM Revenue and Customs (HMRC) guidelines to ensure you comply with the most up-to-date tax obligations related to share buying in the UK.

Final Thoughts

To wrap things up, my complete guide should equip you with the knowledge and confidence to buy shares in the UK.

From understanding the basics to considering platforms and strategies, you’re now ready to navigate the world of share buying.

Make informed decisions, set clear goals, and stay updated on market trends. Investing in shares can be a rewarding path toward achieving your financial objectives.

FAQs

Can I buy shares by myself?

Yes, you can buy shares by yourself. Through online brokerage platforms, you have the ability to research, select, and purchase shares directly, without the need for a middleman.

How do beginners get shares?

Beginners can get shares by opening an account with a reputable online brokerage platform. They can then research and select shares based on their investment goals, and buy them through the platform with ease.

How much does it cost to buy shares?

The cost of buying shares varies depending on factors such as the brokerage platform and the size of your investment. Generally, you can expect to pay a transaction fee or commission for each share purchase.

Can I buy shares without a broker?

No, you typically need a broker or an online brokerage platform to buy shares. They facilitate the purchase and provide access to the stock market.

How many shares should I buy as a beginner?

As a beginner, it’s advisable to start with a number of shares that aligns with your financial capabilities and risk tolerance. Consider factors such as your investment goals and the amount you can comfortably afford to invest.

Will Fenton is the founder of Sterling Savvy. He is a personal finance expert and writes about trading, investing, budgeting, and other financial topics.

Along with his education in Economics & Finance, he has experience working in the financial services industry in London working for one of the UK’s leading financial companies, “a trustworthy and respected provider of news, education and market analysis for the everyday investor”.

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