How to Buy Shares in the UK
Buying shares in the UK is straightforward. Follow these steps to get started.
Step 1: Open a Share Dealing Account
You need an account with a UK-regulated broker. Popular options include:
- Hargreaves Lansdown: The UK’s largest platform. Wide range of funds and shares. Higher fees but excellent research tools and customer service.
- AJ Bell YouInvest: Competitive fees, strong platform, good for both beginners and experienced investors.
- Interactive Investor: Flat-fee model that rewards larger portfolios. Good for regular investors.
- Trading 212: Commission-free share dealing. Clean app interface. Good for beginners who want low costs.
- Freetrade: Commission-free share dealing via a simple mobile app. Limited research tools but very easy to use.
All UK brokers must be authorised by the Financial Conduct Authority (FCA). Your money is protected by the Financial Services Compensation Scheme (FSCS) up to £85,000 per provider if the firm goes bust, though this does not protect against investment losses.
Step 2: Transfer Money
Once your account is open, you need to fund it. Most brokers accept bank transfers (Faster Payments) and some accept debit card payments. Transfers usually arrive same day or next day. You can also transfer existing ISAs or share portfolios from other providers using an ISA transfer or CREST deposit.
Step 3: Place Your Order
Search for the company or fund you want to buy in the platform. Enter the number of shares or the amount you want to invest and confirm the order. Shares typically settle in two working days (T+2) in the UK.
Types of Orders
Understanding order types helps you control the price you pay and manage risk.
Market Order
A market order buys or sells shares immediately at the current best available price. This is the most common order type. The advantage is speed and certainty of execution. The disadvantage is that the price may move slightly between when you place the order and when it executes, especially in volatile markets.
Limit Order
A limit order buys shares only at or below a specific price you set, or sells only at or above a specific price. This gives you control over the price but there is no guarantee the order will fill if the market does not reach your price. Useful when you have a target price in mind and are not in a hurry.
Stop-Loss Order
A stop-loss order automatically sells your shares if the price falls to a certain level. This limits your potential losses on a position. For example, if you buy a share at 500p and set a stop-loss at 450p, your shares will automatically sell if the price drops to 450p. Stop-loss orders are especially useful for protecting against sharp downturns.
UK Stock Exchanges
London Stock Exchange (LSE)
The London Stock Exchange is the UK’s main stock exchange, founded in 1801. Most UK-listed shares trade on the LSE. Shares are traded in pound sterling (GBP) during market hours, 8am to 4:30pm UK time, Monday to Friday.
FTSE 100
The FTSE 100 Index tracks the 100 largest companies listed on the London Stock Exchange by market capitalisation. It includes household names like HSBC, Shell, AstraZeneca and Unilever. The FTSE 100 is often used as a barometer of the UK economy, though many of its companies earn the majority of their revenue overseas.
FTSE 250
The FTSE 250 Index tracks the next 250 largest companies after the FTSE 100. These companies tend to be more UK-focused in their earnings compared to FTSE 100 firms. The FTSE 250 historically has higher growth potential but also higher volatility than the FTSE 100.
FTSE All-Share
The FTSE All-Share combines the FTSE 100, FTSE 250 and FTSE Small-Cap indices, covering roughly 98% of UK listed companies by market value.
Popular UK Stocks
These are some of the most well-known companies listed on the London Stock Exchange:
| Company | Ticker | Sector |
|---|---|---|
| HSBC | HSBA | Banking |
| Shell | SHEL | Oil & Gas |
| AstraZeneca | AZN | Pharmaceuticals |
| Unilever | ULVR | Consumer Goods |
| GSK | GSK | Pharmaceuticals |
| Diageo | DGE | Beverages |
| Rio Tinto | RIO | Mining |
| BP | BP | Oil & Gas |
| National Grid | NG | Utilities |
| Lloyds Banking Group | LLOY | Banking |
These are large, established companies with long track records. However, large size does not guarantee future performance or safety.
US Stocks from the UK
Most UK brokers now offer access to US stock markets. This gives you the ability to invest in companies like Apple, Microsoft, Amazon, Tesla and thousands of others listed on the New York Stock Exchange and NASDAQ.
When buying US shares from a UK broker, currency conversion applies. You will need to convert pounds to US dollars to buy the shares, and convert back to pounds when you sell. The conversion rate and fee varies by broker:
- Some brokers offer competitive FX rates with fees as low as 0.1-0.3%
- Others charge 1-1.5% or more on currency conversion
- Some platforms offer multi-currency accounts to reduce conversion costs
US dividends are subject to a 15% US withholding tax under the UK-US tax treaty, which you can reclaim through Self Assessment if you hold the shares outside an ISA.
Fees and Costs
Understanding fees is critical because they directly reduce your returns.
Share Dealing Fee
This is the commission you pay each time you buy or sell shares. Typical fees range from £5 to £15 per trade. Some platforms like Trading 212 and Freetrade offer commission-free share dealing. If you invest regularly, check whether the broker offers a monthly free trade allowance.
Platform Fee
Most platforms charge an ongoing custody or platform fee for holding your investments. This is typically 0.25% to 0.45% per year of your total portfolio value. Some brokers like Interactive Investor charge a flat monthly fee instead. For larger portfolios, a flat fee is often cheaper than a percentage-based fee.
Currency Conversion Fee
If you buy US or international shares, you will pay a currency conversion fee. This ranges from 0% to 1.5% depending on the broker. Compare brokers carefully if you plan to invest heavily in international shares.
Stamp Duty Reserve Tax (SDRT)
UK shares are subject to a 0.5% stamp duty when you buy. This is automatically deducted by the broker. It does not apply when you sell, and it does not apply to AIM-listed stocks or funds.
Tax on UK Shares
Stocks and Shares ISA
The Stocks and Shares ISA is the most tax-efficient way to hold shares. You can contribute up to £20,000 per tax year across all ISA types. Inside a Stocks and Shares ISA, all capital gains and dividends are completely free of UK tax.
This should be your first port of call before investing outside an ISA.
Capital Gains Tax (Outside an ISA)
If you sell shares for a profit outside an ISA, you may owe Capital Gains Tax (CGT). The annual CGT exempt amount is £3,000 (2025-26 tax year). Above that:
- Basic-rate taxpayers pay 18% on shares
- Higher-rate taxpayers pay 24% on shares
You must report and pay CGT through Self Assessment or the real-time CGT service within 60 days of selling residential property, or by the Self Assessment deadline for other assets.
Dividend Tax (Outside an ISA)
Dividends received outside an ISA are taxed above the Dividend Allowance of £500 per year:
- Basic-rate taxpayers pay 8.75%
- Higher-rate taxpayers pay 33.75%
- Additional-rate taxpayers pay 39.35%
The combination of CGT and dividend tax makes ISAs significantly more attractive for long-term share investing.
How to Research Shares
Before buying any share, do your research.
Read Company Financials
Check the company’s annual reports and accounts. Look for consistent revenue growth, healthy profit margins, manageable debt levels and a strong balance sheet. Most UK brokers provide detailed company financials and research reports for free.
Key Ratios
- Price-to-Earnings (P/E) Ratio: Shows how much investors pay for each pound of earnings. A high P/E may indicate the stock is expensive relative to its profits. Compare the P/E to sector peers rather than using a fixed benchmark.
- Dividend Yield: The annual dividend divided by the share price. A high yield may indicate an income opportunity, but very high yields can be a warning sign if the company is struggling.
- Debt-to-Equity Ratio: Shows how much debt the company uses relative to shareholder equity. High debt increases risk during economic downturns.
Understand the Business
Only invest in companies you understand. If you cannot explain what the company does and how it makes money, you are speculating rather than investing. Stick to sectors and industries you know.
Risks of Individual Shares
Individual shares carry higher risk than diversified funds. A single company can face unexpected problems such as management failures, regulatory changes, competition or economic downturns. Some UK blue-chip shares have cut or eliminated dividends in the past.
Diversification
Spread your investments across different sectors and geographies. Holding 15-20 shares across different industries reduces the impact of any single company performing badly. Even better, combine individual shares with index funds or ETFs for broader diversification.
Consider Funds and ETFs
If picking individual shares feels overwhelming, consider investing in tracker funds or ETFs instead. A FTSE 100 tracker fund gives you exposure to all 100 FTSE 100 companies in a single investment. A global tracker fund gives you exposure to thousands of companies worldwide. This provides instant diversification at low cost.
Worked Example
Consider a 30-year-old who opens a Stocks and Shares ISA with Hargreaves Lansdown.
Setup:
- Opens a Stocks and Shares ISA
- Invests £5,000 as an initial lump sum in a FTSE 100 tracker fund
- Sets up a monthly direct debit of £200 into the same fund
Assumptions:
- Average annual return of 7% (in line with long-term UK stock market averages)
- Ongoing charge of 0.2% for the tracker fund
- Net return of approximately 6.8% after charges
- All returns are tax-free inside the ISA
Projected Values:
| Age | Total Contributed | Estimated Value |
|---|---|---|
| 30 | £5,000 | £5,000 |
| 35 | £17,000 | £20,000 |
| 40 | £29,000 | £35,000 |
| 45 | £41,000 | £58,000 |
| 50 | £53,000 | £90,000 |
By age 50, this investor has contributed £53,000 and built a portfolio worth approximately £90,000. The £37,000 gain is entirely tax-free. If the same investment were held outside an ISA, capital gains tax and dividend tax would reduce the returns significantly.
This example demonstrates the power of regular investing, compound growth and the ISA tax wrapper working together over two decades.
Tips for UK Stock Traders
- Use a Stocks and Shares ISA first: Maximise your tax-free allowance before investing outside an ISA. There is no reason to pay tax on gains when you can avoid it.
- Keep costs low: Small differences in fees compound significantly over decades. Choose low-cost platforms and low-charge funds.
- Diversify: Do not put all your money in a single stock or sector. Spread across different companies, sectors and geographies.
- Do not chase hot tips: Tips from friends, social media or news stories are not investment research. Do your own analysis.
- Invest for the long term: Short-term trading is risky and most active traders underperform the market. A long-term buy-and-hold strategy has historically delivered better results for most investors.
- Do not panic sell during downturns: Markets fall regularly. Historically, they have always recovered over time. Selling during a downturn locks in losses.
- Set up regular investing: Monthly contributions smooth out volatility through pound-cost averaging and build wealth steadily over time.
- Review but do not tinker: Check your portfolio once or twice a year. Rebalance if necessary. Do not react to daily market noise.