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How to buy shares
funkey_monkey
Forumite 386 Posts
Hi,
I’ve got some shares in our company share save scheme and I would now like to purchase some further shares on the open market. How do I go about purchasing these shares as I’ve never bought any shares before?
Thanks.
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If you still want to go ahead and have not paid into a stocks and shares ISA this tax year, you could consider opening a self invested (N)ISA on one of the above platforms or similar others and buying the shares through that (up to NISA investment limits of course). Any profits if you buy/sell within the NISA will be free of capital gains tax, and you only pay 10% tax on dividends (which they deduct for you). The shares need to be eligible for a NISA, but if it's a FTSE listed company they should be. Many AIM shares are now also eligible.
Well, I probably wasn't as comprehensive as I could have been in the name of keeping it straightforward for the OP, though the 10% figure is correct.
Technically there is zero income tax on dividends in an ISA, however you also lose the right to claim back the 10% tax credit on dividends that is available outside ISAs. The 10% is deducted at source by the ISA provider. For a basic rate taxpayer there is no real benefit, as the income tax rate on dividends for basic rate taxpayers outside an ISA is also 10%, so it's income tax neutral. However, it's very beneficial for higher and additional rate taxpayers, since they also pay the effective 10% on dividends within an ISA, but outside an ISA they would pay 32.5-37.5% income tax on divis.
One further clarification, I'm talking about UK company dividends, the rules may be different for foreign (e.g. US) companies, where local taxation rules may also apply.
Hope I'm making sense, haven't had to write this down before...
You dont in practice pay tax on dividends either as a basic rate taxpayer nor in an (N)ISA. What happens is that for basic rate tax payers dividends are taxed at 10% but this tax is deemed to be covered by the Corporation Tax paid on the profits of the company concerned even if it didnt actually make any profits. So you dont get a refund in an ISA as you personally never paid the tax in the first place.
Yes under current tax rules, unless of course you subsequently moved into higher rate income tax, at which point you would start to enjoy the tax saving on share dividends for any shares held in the ISA.
What is considered as small volume? I was thinking of buying maybe £15k of company shares. Are there any accounts to do this from and can I put a sell marker on the shares?
A major advantage is it avoids the hassle of maintaining full records of all your transactions which could be requested by HMRC at some point in the future for shares held outside an ISA.
You don't buy the shares and put them in the ISA, you open a self invested ISA via one of the mentioned platforms or similar and buy the shares within that. The share-buying process is the same on the platform inside or outside an ISA, apart from the fact that not all shares are eligible for an ISA (as mentioned in my post above).
I have a self-invested ISA with TD Direct, and you can put a sell marker on shares in that (for a fixed time period, which can be changed). I imagine the other platforms offer similar functionality. The platforms are quite easy to use.
If you want to buy £15k of shares, at the risk of stating the obvious you could only do this inside an ISA if you haven't made any other ISA contributions in this tax year (though you could transfer funds from another ISA into the new share ISA to make up the amount, under the New ISA rules).
As to whether £15k is small volume, not sure I can comment, but you should consider how much of your overall savings are going in one basket (a single company share), as it has an impact on your overall investment risk profile.