How to get into shares?

Porcupine

Your broker pays the tax on your behalf when you buy the shares. Let's say the deal fee is £10 and you want to spend £100 on shares £1 each. Take the deal fee off, so that's £90 left. Then there's 0.5% tax, which is 45p in £90. So you actually get £89.55 worth of shares, which translates to 89.55 share units.

In other words the deal has cost you £10.45. Stamp duty is only on purchases, so to sell will cost you a straight £10. So if you bought and sold without the share moving at all you'd be down £20.45 - just over 20%, which is why buying small amounts of shares tends not to work very well.

If you buy paper shares from Uncle Joe without using a broker, you have to pay the tax directly to HMRC.

There's probably a way your business (if a limited company) could buy shares if it wanted to, but it probably won't be tax efficient in terms of profits.

grey_gym_sock

the 0.5% stamp duty is automatically added into the total cost of buying shares by the stockbroker (e.g x-o).

so when you buy, you pay:
cost of shares (i.e. number of shares x price per share)
+ stamp duty
+ broker's commission (e.g. £5.95 for x-o)
= total cost

and when you sell, you receive:
cost of shares
- broker's commission
= net proceeds

also note that there is a difference between the buying and selling prices of shares, so that is a further cost (called the "spread"). this can vary from under 0.1% for shares in the biggest companies to as much as 10% for shares in small, infrequently traded companies.

there are 2 further possible taxes when you own shares: income tax on dividends (if the shares pay any dividends while you own them), and capital gains tax on any gains (if you sell them for more than you bought them for).

dividends (assuming this is for UK companies) are paid with a theoretical 10% tax credit attached - theoretical because it can never be reclaimed. if you are a basic rate tax payer, then the income tax rate on dividends is 10%, so there is no more to pay. if you are a 40% tax payer, then the rate on dividends is 32.5%, so you have another 22.5% to pay - i.e. for every 90p you receive, there is a 10p tax credit, and you have to pay another 22.5p - so the extra tax is actually 1/4 of what you receive. for self-assessment, there is 1 box where you enter the total amount of dividends received (not on the self-employment section of the form).

for capital gains tax purposes, you calculate the gain or loss when you've sold a share as the net proceeds minus the total costs. you add up all the gains and losses during the tax year. if the total is a net gain of more than £10,600, then you pay capital gains tax on the excess. if the total is a net loss, then you can carry it forward to set against gains in future years. there is a capital gains tax section of the self-assessment form, which you need to fill in if you have gains over £10,600, or net losses which you want to carry forward, or total net proceeds over £42,400 (i.e. 4 x £10,600).

King_Weasel

You are asking elementary questions about how to buy shares. Fair enough - that's one function of this board.

My concern is that you haven't asked about why or whether to buy shares. Maybe you've already gone into this and are satisfied this is the best course for you. But if not, you need to ask these questions first. A bit like asking how to buy a train ticket - fine if you know where you want to go and have already ruled out coach and plane.

But if you definitely want to buy shares directly (as distinct from unit trusts etc) I can recommend The Share Centre. Basically they're execution-only and relatively cheap, at least for small transactions. But you can also get free advice/recommendations from them though it won't be tailored to your individual situation.

catrobs34672

Since this is going to be your first time to try it, you really need to read a lot of books and helpful sites to learn more about it. And yes you definitely have to consult a broker regarding this matter. But you have to really study the background of the broker. There are some illegitimate brokerage companies doing the same business that are not really affiliate with the stocks. Be extra careful with who you deal with since this will involve money.

WilliamO

Thanks everyone, I will swat-up on all that has been said here and recommended here. I get a feeling that a lot of what has been said isabout who to trust/go with as a broker etc. Anyway, I will delve deeper. Thanks again for all your helps, they are much appreciated.

WilliamO

Jegersmart

WilliamO wrote: »

Thanks everyone, I will swat-up on all that has been said here and recommended here. I get a feeling that a lot of what has been said isabout who to trust/go with as a broker etc. Anyway, I will delve deeper. Thanks again for all your helps, they are much appreciated.

WilliamO

Hi William

I feel it needs to be said that from what I see in most of the replies there is some concern that you want to get into equities but thought you could buy them directly from the company in question......which shows complete naivety. I honestly mean no offence by this, but I do think it needs to be said. There is nothing wrong with knowing nothing about something when you start to look at something new, but my advice would be to take a look at the risks involved in investing this way - in terms of price volatility and how much of your overall pot you are looking to invest in this way so that you know what you are letting yourself in for. There are many online brokers or execution platforms which will allow you to buy and sell shares as you see fit - it is easy to set up an account with them - X-O, Selftrade, III and many others - but this should not be your main concern. Your main concern should be to learn about what you are looking to get into so you don't get any nasty surprises later on.

I hope that doesn't come across as harsh!

J

justtryingtogetby

Don't go with iii.co.uk, they have just set up quarterly fees of £20.

Like everyone has said, have a read through some books. Sounds like you just want to invest in company.

Remember the classic, 'don't put your eggs in one basket'.

Diversification my friend.

Dunree

Someone else thinking along the same lines as myself

Been having a think about this for a while now, and over the weekend, I changed banks.

One of the services they offered was Selftrade (Smile bank acc).

Looking at some of the advice on here, perhaps I should look a bit deeper into it before I do.

I'm not a big gambler, I only have the occasional bet in the bookies, and this was more a way of keeping my brain active and occupied, things that are lacking just now

SailorSam

I think this is a good place to visit, you can open a practise account and learn before you use real money.
http://www.share.com/

Dunree

SailorSam wrote: »

I think this is a good place to visit, you can open a practise account and learn before you use real money.
http://www.share.com/

Just playing with Halifax Fantasy Share Trader

Will see how it goes, if I'm rubbish, nothing lost