Best S&S Isa account for investing in US stocks

kannaiah

Hi,

I have s&s isa account already but I never bought any share in US markets because of large trading costs.

Please suggest isa with less currency and dealing costs.

Regards

masonic

Why would you want to buy US shares directly instead of through a fund?

Scarpacci

Have you considered whether it's worth putting US stocks in an ISA considering the American withholding tax? If you hold UK stocks outside an ISA or would have to do so if you load up your ISA with American stocks, you might find yourself paying more dividend tax on the UK holdings than you have to and not really saving anything on the dividend tax for US stocks in an ISA.

The US will withhold 15% in ISAs and unwrapped accounts after you've filled in a W8-BEN, so that's a given (unless you put them in a SIPP). If your non-ISA UK holdings cross the £5,000 tax-free allowance, they're taxed at 7.5% basic rate. You would avoid that 7.5% tax in ISA (and more if you're higher rate), but gain no comparable advantage on the American shares which will still have the 15% deducted by the Americans. There's no loss to holding US stocks outside an ISA when it comes to dividends. This would change if you're a higher rate taxpayer where there'd be an advantage of only paying the Americans 15%, but it's also worth noting outside an ISA you can offset the 15% already paid to the US against your UK dividend tax liability.

Generally, for dividend tax, it makes more sense to keep US shares unwrapped., though putting US stocks in an ISA will still shield them from capital gains. And perhaps this is all irrelevant (now) if you don't see yourself earning over £5,000 dividends.

kannaiah

I didn't know about withholding tax of 15% even with W8-BEN filled.
Is there a way of claiming the dividend tax paid?
I was considering ISA to shield from CGT.

From what I have read if going for SIPP one might be able to use Interactive brokers (they have less currency conversion margins).

Least currency conversion margin one might get is 0.3% with IG but transaction fees are large.