How to Buy Stocks and Shares in the UK

Investing in stocks and shares allows individuals to participate in the potential growth of companies. This involves purchasing small units of ownership in publicly traded businesses, effectively becoming a shareholder. These units, known as shares or equities, can increase in value over time, and some companies distribute a portion of their profits to shareholders as dividends.

Setting Up Your Investment Account

Establishing an investment account is the initial step toward purchasing shares. Individuals choose from various investment platforms, including traditional brokers, online platforms, and robo-advisors. The selection of a platform depends on factors such as fee structures, the range of investments available, and the level of support provided. Fees can include transaction charges, which may be a flat rate per trade or a percentage of the trade value, and annual platform fees, which might be a fixed amount or a percentage of the assets held.

The UK offers specific account types designed to accommodate different investment goals and tax considerations. A Stocks and Shares Individual Savings Account (ISA) allows investments to grow without UK income tax on dividends and no capital gains tax on profits, up to an annual contribution limit of £20,000 for the 2025/2026 tax year.

Another option is a Self-Invested Personal Pension (SIPP), which functions as a pension vehicle that permits investment in shares. Contributions to a SIPP receive tax relief from the government, with funds growing free from UK income and capital gains tax within the pension. The annual allowance for SIPP contributions is £60,000 or 100% of earnings, whichever is lower; non-earners can contribute up to £3,600 annually.

For those who have utilized their tax-advantaged allowances or prefer a more flexible structure, a General Investment Account (GIA) is available. A GIA does not provide specific tax advantages. Capital gains tax and income tax on dividends may apply to gains or income exceeding certain annual allowances.

Opening an investment account involves a standard application process that includes providing personal details, such as your National Insurance number and bank account information. Platforms conduct identity verification checks, known as Know Your Customer (KYC) and Anti-Money Laundering (AML). This involves submitting proof of identity (e.g., passport, driving license) and proof of address (e.g., recent utility bill, bank statement).

Funding Your Account

After opening an account, the next step involves transferring funds. Common methods for depositing money include bank transfers through Faster Payments or BACS, debit card payments, and setting up direct debits for regular contributions. The processing time for funds to appear in the investment account varies based on the chosen method.

Faster Payments are processed almost immediately, within seconds or up to two hours, and are available 24/7. In contrast, BACS transfers may take up to three business days to clear, making them suitable for less time-sensitive deposits. Linking a bank account to the investment platform is a straightforward process. This connection enables transfers, allowing individuals to move money into their investment accounts when ready to acquire shares.

Researching and Selecting Shares

Identifying which shares to purchase requires investigation into company fundamentals. This involves understanding a company’s business model, its position within its industry, and the competitive environment it navigates. Examining these aspects helps in assessing a company’s long-term viability and potential for growth.

Company annual reports and financial statements offer detailed insights into a company’s performance and financial health. Reputable financial news outlets and established financial websites also provide current market analysis and news that can influence investment decisions.

A basic analysis involves reviewing key financial metrics such as revenue, which indicates a company’s sales, and profit, which shows its earnings after expenses. Understanding a company’s debt levels is also important, as high debt can pose financial risks. Grasping these fundamental indicators provides a starting point for evaluating a company’s financial standing.

Not concentrating all investments into a single company or industry can help manage potential portfolio fluctuations. Diversification, distributing investments across various companies and sectors, aims to spread out investment choices. This strategy contributes to constructing a portfolio with a broader exposure to different market segments.

Placing Your Order

Once funds are available and a specific share is chosen, place a buy order through the investment platform. Navigating the platform involves using a search function to locate the desired share by company name or its unique ticker symbol. This brings up the relevant trading page for that particular stock.

When placing an order, you have two primary options: a market order or a limit order. A market order instructs the platform to buy the shares immediately at the best available price in the market at that moment. This type of order prioritizes speed of execution. Conversely, a limit order allows the investor to specify a maximum price they are willing to pay per share. The order will only be executed if the share price falls to or below the set limit, providing more control over the purchase price, though there is no guarantee of execution if the price does not reach the specified level.

After selecting the order type, input the number of shares or the total amount to invest. Before finalizing the transaction, review all order details, including the share name, quantity, and price, to prevent errors. Upon confirmation, the platform processes the trade and provides a confirmation message with execution details.

Managing Your Investments

After shares are acquired, monitor their performance through the investment platform’s portfolio view, which displays current holdings. This review helps investors stay informed about their investments. Companies may distribute dividends, which are portions of their profits paid out to shareholders. These payments can either be received as cash or automatically reinvested to purchase more shares, depending on the investor’s preference and the platform’s options.

When an investor decides to sell shares, the process generally mirrors that of buying. The shares are located on the platform, a sell order is placed, and the transaction is executed. Maintaining records of all trades, including purchase and sale dates, prices, and any dividends received, is important. This record-keeping facilitates financial tracking and assists with any self-assessment tax obligations from investment income or gains that exceed allowances.