How to Trade US Stocks in UK

How to Buy US Shares in UK

Buying US shares in the UK can be an excellent option for your portfolio diversification. The US stock market is a hub of tech giants and large-cap firms, including Google, Microsoft, Apple and Tesla. 

There are more chances for trading US stocks in the UK than ever before, and you can be grateful to the evolution of the internet and app world for that. Indeed, trading in stock from all around the world has never been easier, all from the comfort of your mobile device. There are numerous choices accessible to you if you want to buy US equities from the UK.

Investing in US equities is as simple as investing in UK stocks, and it helps you diversify your portfolio slightly. Stocks in the United States have typically outperformed those in the United Kingdom. Over the last century, particularly in the previous few years, U.S. stocks have generated phenomenal gains for investors. And, while past performance is no guarantee of future results, the United States possesses the demographics and economic climate required for expansion. 

Learn How to Trade US Stocks in UK, why you might want to, and what to keep in mind.

How to Choose US shares 

Exchange rates might be turbulent at times, reducing your trading gains. You’ll also have to pay commissions and fees on your transactions. Currently, over 7,000 distinct companies are openly traded on US stock exchanges. To buy US shares, you will necessitate some research. Some brokers accept foreign currency deposits, however most U.K. Investors must deposit pounds and then have them translated to US dollars. Before you begin, you must first grasp the various tax requirements that apply to overseas investment.

The stock market in the United States includes a huge panorama of enterprises ranging from microcap companies to large-cap companies. Investors in the United Kingdom will have little trouble researching these companies, and you can look up their prices, profits, and other important information. 

The United States has some of the world’s largest and most diverse stock markets. And as we all know that some of the world’s most valuable entertainment stocks, such as Amazon and Netflix, are all extraordinarily viable and popular investments. When it comes to Apple’s new product unveiling, whether it’s the iPhone, iPad, or any sophisticated product, everyone looks at them. There have been significant developments in terms of mergers and acquisitions. You should not see the lower figure as a negative sign because the economic situation constantly shifts.

How to trade US stocks in UK

Trading differs from stock trading because you do not own the underlying asset, allowing you to go long or short on the shares. When trading US stocks, you can use leverage to put down a small amount to acquire total market exposure.

You’ll need to open an account with a highly regulated broker who specialises in international stocks. These vehicles, known as share dealing accounts, allow U.K. investors to trade actual U.S. shares on the exchanges. Furthermore, trading accounts that offer securities such as contracts for difference (CFDs) can provide exposure to US corporations.

You should look for a decent trading platform for US shares that operates in the United Kingdom. More information on which platforms to consider can be found below. Compare exchange rates, service usability, and monthly fees before doing so. It’s also interesting investigating how each service makes money, as they’ll all need to make money somehow.

Fill out your W-8BEN form. It is a kind of license for trading international securities in the UK. W-8BEN will enable you to begin trading in US equities and ensure that you may profit from lower US tax on listed firms. There are specific platforms like Stake on which you can access this process with proper automation. 

You can invest in US stocks using a variety of trading apps, brokerages, online trading platforms, or purchasing ETFs. Each will provide you with varying amounts of access to the US stock market, as well as trading options and features. Once you’ve settled into your preferred US share trading platform, make sure you’re aware of all costs that may apply. Then, when you are confident enough that everything is in order, you can begin trading in US stocks. 

You do not need to follow your investments every second if you are trading US stocks. American stocks are pretty unpredictable, but technical indicators and specific trading strategies can warn you if your assets veer off course. If you are looking for day trading, you should closely monitor your stocks because you won’t hold any positions overnight.

Choosing the appropriate broker is an essential aspect of successful investing. When purchasing overseas stocks, ensure that your broker satisfies your needs in two crucial areas, fees and convenience of use. Fees imply cheap overall trading costs and convenience, which means an easy-to-use platform, friendly customer support, and so many investment possibilities.

Select the Most Appropriate Stock Trading Platform for You

The ideal way to acquire US equities in the UK may be determined by your individual circumstances and preferences. However, it is worth picking a brokerage platform that offers more than just a large range of US equities. However, it also assures that you pay the lowest possible fees and commission rates.

If you intend to trade frequently, you should strongly choose a platform that provides commission-free and limitless trading. It is also important to examine your trading speed. As a result, a platform that allows you to hold funds in USD is likely to be useful.

Alternatively, if you intend to establish a small portfolio and hold those stocks for an extended length of time. Alternatively, you may like to build a portfolio that includes both US and UK companies. Then select the platform that best meets those requirements. When it comes to stock brokerage platforms, there is not a solution that works for all.

Check List you need while buying US shares in UK

Exchange rates differ from platform to platform, and this will be utilised to offset low broker fees in part. First, determine what these are. T1 markets is a well organised online stock broker that offers very low exchange fees.  

Examine how recent the market data provided by each platform is, the ability to make trades based on current information is crucial. Is it quick, easy, and convenient to execute a trade and track market performance?

Compare the fees charged by each company when you trade US equities. Please keep in mind that this will differ from broker costs for UK stocks. In addition, some platforms charge a monthly subscription to keep your account active or to use particular features. 

Some systems provide access to a few significant foreign marketplaces, but others allow you to buy and sell stocks on a variety of exchanges.

Is the platform only available online, or may trades be placed over the phone as well? Are there flexible choices, such as limit orders, that allow you to profit from market fluctuations? When trading US equities, you must complete a W-8BEN form to assess your tax status. 

Some brokers allow you to do this electronically, while others need you to mail one back. Because trading stocks is complicated, does the platform provide the tools you need to improve your financial knowledge?

Tax on buying US stocks in the UK

Of course, the tax will always be a factor in share trading. Finally, some of the money you earn from stocks is likely to be subject to income tax or capital gains tax. It follows that it is well worth enquiring with HMRC about how overseas share income works when it comes to disclosing such payments on your yearly tax return.

If you have US-listed shares in an Isa, the broker or platform from which you purchased them should give you the W-8BEN tax form so that you can take advantage of the treaty tax rate. Buying US shares in the UK does not obligate you to pay all of the IRS’s requests.

Many governments levy a withholding tax on dividends received on non-residents direct investments. Brokers, on the other hand, do not have similar arrangements with many other nations, so investors must pay the full withholding tax. This affects the payout that is received into your account after withholding tax has been deducted.

You should be aware that tax will apply on the US side of things as well. The tax is withheld automatically before the investors receive their dividends. However, the UK has double taxation treaties with a number of nations, preventing UK investors from paying tax twice on the same revenue. 

Investors can either claim tax back from the appropriate country’s tax authorities after the tax deduction has already been made, or they can request that it not be deducted before it is taken. If you sell your stocks and shares, the IRS may levy taxes on them. However, before you begin purchasing shares from the United States, you must first complete a W-8BEN form. Investors can claim relief for foreign tax paid and receive some or all of the amount paid back, allowing them to pay solely UK tax on their investments.

This basically will tell the IRS that you are purchasing from abroad and will be subject to your own income tax regulations. In fact, correctly completing a W-8BEN form can reduce the amount of US tax by up to 30%. 

If you want to circumvent this process, you can file a claim prior to receiving dividends to avoid paying withholding tax in the first place. You can do this by writing to the registrar of the company whose shares you own and requesting that the treaty tax rates be applied to your dividends at all times. However, because of the administration requirement, finding a registrar who will be prepared to undertake this is often more difficult. Portfolio handlers can also do the same, but again, it is not easy to find them. 

The Advantages of Purchasing US Shares

All indications point to a portfolio with a lot of variety. Most investors who want to buy American equities do so since a British investor can only provide this much variety. Investors in the UK can buy US shares with T1 markets easily.  

The global financial system is envious of US stocks. While a diverse foreign portfolio is required for good risk management, U.S. stocks should account for a major amount of your portfolio due to their high growth potential, favourable demographics, and favourable regulatory environment. Investment solely in companies from your home nation is a narrow-minded approach to investing. 

Even American investors allocate a portion of their portfolio to Asian and European stocks, so UK investors would be advised to diversify their portfolio with a position in US equities.

Getting more affordable. Brokerage fees are getting more inexpensive as a rising number of online share trading platforms battle for market dominance. Get access to various investing options. Trading on US stock exchanges enables you to take advantage of financial opportunities that are not available in the UK. Diversify your holdings. 

If all of your investments are contingent on the performance of a single national economy. Purchasing international shares safeguards you from putting all of your eggs in one basket.

The Disadvantages of Purchasing US Shares

While US stocks provide immense promise, they also carry a number of hazards. Investors in the United Kingdom may not be able to keep up with American companies as carefully as their English counterparts. Your foreign broker will almost certainly charge a commission, a currency exchange fee, and extra fees for inactivity. When you place a trade on an international stock exchange, you may be charged greater brokerage fees.  

Foreign shares can have different trading hours and currency exchange rate risks. Understanding these dangers will help you save money in the long run. International trading accounts may incur fees that UK only platforms do not, such as inactivity and exchange fees.

American investors have grown accustomed to free trade for a long time. Most big U.S. brokers have eliminated commissions on stock and ETF trading. The USD-GBP exchange rate swings regularly, which may have a detrimental influence on your investment. 

Regulations are in place to prevent U.K. investors who buy overseas shares from being taxed twice. Missing papers or submitting the incorrect form could lead to a significant tax issue.

Bottom Line

This was the detailed guide on How to Trade US Stocks in UK. Investing in US companies can be a terrific strategy to gain access to emerging tech stocks while diversifying your portfolio. Before you buy the stocks, figure exactly how much you’re going to spend. Trading equities from the United States in the United Kingdom is no longer impossible. You may look at thousands of US stocks while constructing your existing UK portfolio from the convenience of any device. It’s a vast market for investors, but you should be aware of any additional fees, such as currency exchange, that you’ll have to pay in addition to the commission.

It can be time-consuming and laborious, but investing in US stocks is well worth it. For more than a decade, US stocks have outperformed, and this trend shows no indications of abating. Thus, investment in US stocks is an essential component of any well-diversified portfolio.

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