True Cost of purchasing US shares

Matttt

Hello,

I’m new to this forum and believe I’m posting in the right place.

I am looking into purchasing shares in a US company however want to know what costs i have missed out. More specifically what the US goverment would tax me when i do the following.

Say i use halifax’s share dealing account.

Start with £2000 in the account.

Get charged £12.50 for the trade leaving £1987.5 in the account.

Subtract 1.2% for halifax charge to use foriegn currency leaving £ 1963.65 in the account.

Convert to US dollars = $2611.65 in account

Purchase 13 shares at $200 each $11.65 dollar remains in account.

The share price has increased over 3 years to $250 per share

13 shares at $250 now gives $3250

Convert back to gbp = £2443

Subtract 1.2% for foreign currency exchange charge = £2414

Subtract £12.50 for trade charge

Leaving £2401 in the account.

What charges are there in this process i am unaware of from the american goverment?

Am i correct in the uk goverment only charging capital gains tax ~40% ?

Many thanks in advanced for your reply

TBC15

Why would you bother? All sounds very complicated, and if it was a good idea you would know the answers to your questions.

EdSwippet

Matttt wrote: »

What charges are there in this process i am unaware of from the american goverment?

On the example numbers as given, none.

The US will tax dividends paid out to you by US stocks, at the US/UK tax treaty rate of 15% provided you supply your broker with a completed W-8BEN form, but from your example it looks like you either bought shares that do not pay a dividend, or else did not hold them long enough to receive a dividend. If you do receive a dividend, you can claim up to the full 15% paid to the US back from the UK as a tax credit, but only if you hold these shares outside of ISAs and SIPPs. Inside ISAs and SIPPs, the 15% you still have to pay in US tax on dividends is a deadweight loss.

There is no US tax to pay on capital gains (although some US holdings, typically ETFs but perhaps not exclusively, might occasionally give you a 'short term capital gains distribution' and the US tax laws can magically transform that into an 'effective' dividend and then tax you on it). You may of course have a UK capital gains tax liability.

Matttt wrote: »

Am i correct in the uk goverment only charging capital gains tax ~40%?

UK capital gains tax is 0% up to the first £12k, then 10% for basic rate taxpayers and 20% for higher rate taxpayers.

londoninvestor

EdSwippet wrote: »

Inside ISAs and SIPPs, the 15% you still have to pay in US tax on dividends is a deadweight loss.

Some SIPP providers (AJBell and HL at least) can reclaim the 15%, but you can never reclaim it in an ISA.