How to Buy US Shares in the UK

Investing in the United States stock market offers access to a diverse range of companies and sectors. They offer portfolio diversification and growth prospects. For UK residents, understanding the necessary steps and implications is important. This guide outlines the process, from platform selection to tax considerations for acquiring US shares.

Choosing a Trading Platform

Selecting a trading platform is a first step for UK residents investing in US shares. Platforms must be regulated by the Financial Conduct Authority (FCA) in the UK, ensuring consumer protection and financial standards. Options include traditional brokers, online services, and investment applications, each with distinct features.

When evaluating platforms, several criteria warrant consideration. Access to US exchanges is a primary requirement for purchasing US equities. Fee structures vary significantly, including commissions, foreign exchange (FX) fees, and platform or inactivity charges. Some platforms offer commission-free trading on US stocks but might compensate through higher FX fees or other charges.

The user interface, research tools, and customer support are additional factors for the investing experience. Minimum deposit requirements can also differ, from no minimums to substantial initial investments. Comparing these aspects against individual investment goals and trading frequency helps determine the most suitable platform.

Understanding Account Types for US Share Investment

UK residents have several investment account types with distinct tax implications for US shares. Account choice influences how income and gains are treated under UK tax law. Understanding these differences before investing helps manage potential tax liabilities effectively.

A General Investment Account (GIA) is a basic option for holding investments, including US shares. While straightforward, a GIA offers no specific tax advantages, meaning dividends and capital gains are subject to UK income tax and capital gains tax. This account provides direct market access but lacks tax-efficient wrappers.

A Stocks and Shares Individual Savings Account (ISA) provides a tax-efficient environment for investments up to the annual allowance (£20,000 for 2024/2025). Within an ISA, all income and capital gains from investments, including US shares, are exempt from UK income tax and capital gains tax. However, US withholding tax on dividends from US shares still applies even within an ISA.

A Self-Invested Personal Pension (SIPP) is a tax-advantaged account for retirement savings. Contributions to a SIPP benefit from tax relief, and investments grow free from UK income tax and capital gains tax. US shares can be held within a SIPP, and dividends from US companies in a SIPP may be exempt from US withholding tax entirely due to the UK-US Double Taxation Agreement, reducing it to 0%.

Funding Your Investment Account

Once a trading platform and account type have been selected, the next step involves depositing funds to purchase US shares. Common deposit methods include bank transfers, debit card payments, and direct debits. These methods allow for convenient and secure transfers from a personal bank account to the brokerage account.

Currency conversion is a consideration when investing in US shares, as US equities trade in US Dollars (USD). Funds deposited in Great British Pounds (GBP) must be converted to USD before purchases. This conversion process involves foreign exchange (FX) rates and associated fees, which can impact the overall cost of the investment.

FX fees are applied as a percentage or spread, ranging from 0.15% to 1.5%, depending on the platform and conversion value. Comparing these charges among platforms is advisable, as competitive FX rates lead to savings, especially for frequent or larger investments. Some platforms allow holding multiple currencies, providing more control over when conversions occur. Transfer limits and processing times vary by platform and funding method, so review these details before initiating a transfer.

Navigating Tax Implications

Investing in US shares as a UK resident involves both US and UK tax obligations. Understanding these implications is important for accurate reporting and optimizing returns. The primary US tax consideration for UK investors is the withholding tax on dividends paid by US companies.

The standard rate of US federal withholding tax on dividends is 30%. UK residents can reduce this rate to 15% by submitting a W-8BEN form to their brokerage. This form certifies non-US person status and allows claiming benefits under the UK-US Double Taxation Agreement. The brokerage facilitates W-8BEN submission. For investments held within a SIPP, qualifying US dividends may even be exempt from US withholding tax, reducing it to 0%.

Dividends from US shares are also subject to UK dividend tax. The UK provides a Dividend Allowance (£500 for 2025/2026), making income up to this amount tax-free. Any dividend income exceeding this allowance is taxed at different rates depending on the investor’s UK income tax band: 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers. The UK-US Double Taxation Agreement aims to prevent double taxation, allowing for credit for the US tax already paid against the UK tax liability on the same income.

When selling US shares, profits are subject to UK Capital Gains Tax (CGT). An annual CGT allowance of £3,000 (2024/2025) applies. Gains above this allowance are taxed, with rates varying based on the investor’s total taxable income. For basic rate taxpayers, the CGT rate is 10% (or 18% for residential property), while higher and additional rate taxpayers face a 20% rate (or 24% for residential property). CGT applies to the gain after deducting acquisition costs and allowable expenses.

Investors must declare income and gains from US shares to HM Revenue and Customs (HMRC) if they exceed allowances. This is done through a Self-Assessment tax return. The Self-Assessment registration deadline is October 5th following the tax year end (April 5th), with online returns due by January 31st of the following year. Proper record-keeping of all investment transactions, including purchase and sale prices, dividends, and fees, is essential for accurate tax reporting.