Living in London and with high living costs, we look for ways to increase our wealth. In the UK there are many ways to grow our capital from property investment, EIS scheme, saving accounts, or trading.
With current high mortgage rates, many find it hard to invest in property. This is due to the 25% deposit for a buy-to-let mortgage and high interest rates.
This is why trading stocks is a great decision such as Stocks and Share ISA which are tax-free! UK is one of the few countries that offer such account types (Stocks and Shares ISA)
If you’re new to the UK or want to trade stocks in England, this article will clarify how it works.
Learn the basics of trading stocks
Before diving into any trading platform, I highly recommend going through blogs or websites that offer trading lessons at no cost. With the content available on YouTube and trading websites this
For example, Damien Talks Money has around 210k subscribers. His trading content has examples, tutorials, and guides. His video on “How to Invest Your First £100: Investing for Beginners” is a good 12 minutes that covers the key things beginner knowledge.
Another great source for beginner trading guides is InfinityPP website. InfinityPP is a trading and stock market analysis website based in London that offers trading tips and stock market analysis with real-life examples.
How to find a good stockbroker for trading stocks?
There are more than a hundred trading platforms on the internet. But trusting one that is reputable and regulated is very important. Some trading platforms have many features. This is great for experienced traders. But, we don’t need complex functions as beginners.
To make it easier, we have gathered 4 key points that a platform needs to tick:
- Is the trading broker regulated in the UK?
- Can you access the platform via the website?
- Does the platform offer Stocks and Shares ISA?
- Does the platform offer a demo account?
Please keep in mind that trading platforms charge a commission when purchasing stocks, whether in the UK or abroad.
Stocks and Shares ISA in the UK
Trading stocks/shares or Forex in the UK falls under the capital gain tax. In order to encourage people to get involved in the stock market, the UK offers a type of investment account called “Stocks and Shares ISA”. This type of account is free from UK tax. You will not pay any tax from the profit of your trades! There are a few key points:
- There is a limit of £20,000 for investment. You cannot exceed this limit in a tax year.
- You must be over 18 years old.
- Resident in the UK.
CFD trading in the UK
The UK is one of the few countries where CFD trading is regulated. CFD (Contract for Difference) is a form of financial derivative. CFD trading offers leverage; this means you don’t need to have the entire capital of the stock.
For example, If a stock is worth £100 with leverage, you can open a position with £10. This might sound great. However, it can boost losses as well as profits.
Note: Trading brokers can only offer leverage of up to 30:1. This is set by FCA.
Conclusion
Trading stocks in the UK has a few key unique aspects compared to other regions. Stocks and Shares ISA offers a tax-free investment which is great if you are new to trading or in the higher tax bracket. Stockbrokers offer CFD account types so you need far less capital to start stock trading.
If you are confident trading with leverage but the tax aspect makes it difficult, Spread Betting is an alternative. It is a form of derivative trading but tax free.
Choose a reputable broker that is regulated and can easily be contacted.
