How to buy shares UK: 4 steps for beginners

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Money invested in shares tends to outperform cash held in a savings account over a long period of time. Buying shares in the UK stock market can help you build up a nest egg for retirement, and provide a route towards financial freedom that’s accessible for everyone.

A note from our Director, Michael Charalambous: “It is our collective belief that everyone has the right to prosper, no matter who you are, where you’re from, or your start in life. Each and every one of us at Invezz has experience buying and selling shares, trading the markets, and has learned hard lessons during that process. We’ve written this guide to ensure you have an honest, straightforward, and simple route forwards to gaining a head-start in the stock market. From James Knight, Prash Raval, and myself, good luck on your journey!”

The reality is that anyone can buy shares right now, armed with just an internet connection and as little as £10 in the bank.

This guide explains how to buy shares in a company in the UK, taking you through how the process works for the first time and answering every key question you want answered. Find out how much money you need to get started, how much buying shares is likely to cost you, and which UK investment apps are the best for buying shares.

Let’s dive in.

What are shares?

A ‘share’, also known as ‘stock’, is a small piece of a company. When you buy a share, you are essentially buying part of that company. With ownership comes various benefits, such as the right to a portion of the profits, paid out as dividends, and the ability to vote on issues that affect the business.

Shares are bought and sold on stock exchanges, like the London Stock Exchange or the New York Stock Exchange. Their prices go up and down based on how the company is performing, investor sentiment, and the overall economic situation.

The total value of all shares in a company add up to its overall valuation, which is known as the ‘market capitalisation’ or ‘market cap’. For example, if there are a million shares in a company, selling for £1 each, the company would be valued at £1 million on the stock market.

How do I make money from investing in UK shares?

The goal of most investors is simple: to purchase shares at a lower price and sell them at a higher price. If the value of your shares increase, you get to keep the profit when you sell them. This price appreciation is the most common way to make money from buying shares.

For example: You buy 10 shares in Apple at $180 per share.

Your initial investment is 10 x $180 = $1,800.

After a few months, you decide to sell those stocks. The Apple share price is now $200.

You receive 10 x $200 = $2,000.

The flip-side is that you can also lose money if the value of your shares fall after you buy them. This is the risk of investing in stocks and shares. As the price fluctuations of a stock are often related to the performance of the business, make sure you spend some time researching each company before you buy shares in it.

Another way to make money is through owning dividend stocks. Some companies pay out a portion of their profits to shareholders as dividends. If you own shares in a dividend-paying company, you receive regular payments throughout the year, usually on a quarterly or biannual basis.

For example: Apple is a dividend paying stock that pays a dividend four times a year. Dividends are reported on a per-share basis and the amount you receive is that figure multiplied by the number of shares you own.

Apple’s most recent dividend payment was $0.24 per share.

If you own 10 shares:

10 x $0.24 = $2.40.

You receive $2.40 into your investment account automatically on the payable date.

The different ways to invest in shares

Buying shares in individual companies is one way to invest. Another popular option for beginners is to buy ETFs (exchange-traded funds), which are investment products that contain shares in lots of different but related companies. 

Here are the best ways to buy shares for beginners:

• Online share dealing. This is the practice of buying and selling shares in individual companies with the goal of making a profit when you sell. Share dealing can be both a long term or a short term 
• Investment funds and ETFs. Funds and ETFs are investment vehicles that contain shares in many different companies. They provide diverse portfolios that are either managed by an investment professional who decides what to buy for you, or which pick stocks automatically based on a set of guiding principles. 
• Stocks and shares ISAs. An ISA (Individual Savings Account) is an investment account that offers tax benefits to UK residents. You can deposit up to £20,000 per year into a stocks and shares ISA and you won’t have to pay tax on any capital gains. If you’re eligible for an ISA, it’s a good idea to use one, as it can save you a lot of money in taxes.
• SIPPs. A SIPP (Self-Invested Private Pension) is a personal pension where you decide what to invest in, as opposed to ready-made pensions where the provider decides how to invest the money. Like an ISA, a SIPP offers tax benefits, so you can invest up to £40,000 a year tax-free. The main thing to note with a SIPP is that you can’t access any money you deposit into it until you’re 55. 

What you must know before you buy UK shares

Investing in shares is quite straightforward, but there are some important things you should know before you dive in. Consider these tips to give yourself the best chance of investing successfully.

• Share prices can go down as well as up. Historically, stock markets go up over time, but it’s not a straight line and not every company succeeds. There’s no rule that guarantees the companies you invest in must increase in value. You can take steps to mitigate the risk of losing money, but it’s a fact of life that some of your investments will ultimately end up being worth less than you paid for them.
• Consider paying off high interest debt first. Investing is a good way to build long term wealth but in most situations you should pay off any high interest loans or debts first. This does not include a mortgage or a student loan, but if you have any payday loans or an overdraft, these types of loans often charge interest that would exceed the amount you make from your investments.
• Share dealing platforms are regulated in the UK to protect you. To operate in the UK, stock brokers must be regulated by the Financial Conduct Authority (FCA). You should only use regulated brokers to invest in shares. Each broker has a unique reference number, usually found in the website footer, that you can use to check whether it’s regulated on the Financial Services Register. Among other things, regulation means that customer deposits are insured (up to £85,000) in the event the financial institution collapses and is unable to pay back the money itself.
• Use your existing knowledge to help choose investments. The legendary investor Warren Buffett once proclaimed that you should ‘invest in what you know’. While you should be careful about who you take investment advice from, if you aren’t sure which stocks to buy this can be a good place to start. If you know an industry well, from professional experience or just a personal interest, use that to your advantage and start there.
• Find quality, reliable sources of research. One of the most important parts of investing in shares successfully is spending time researching the right companies to put your hard-earned money into. The likes of Marketbeat, MacroTrends, Stocktwits, Finviz, and TradingView offer access to the latest trends, recommendations, and earnings releases, as well as the tools required to help you do your own analysis. You should also use reliable news outlets to find the latest stock market news and keep track of the companies you’re interested in.
• Start small and invest gradually over time. It’s a good idea to start with small purchases until you have more experience. You don’t need a huge amount of capital to get started, but you do need to be smart with it. If your budget is £100, think about only spending £10 or £20 at a time. You never want to put all your money in one stock, and spreading out investments over time can be a good way to balance out short term volatility.
• Look for established companies that pay dividends. Many businesses pay out a portion of their profits to shareholders in the form of dividends. These small additional payments can be a good way to earn some extra income. However, you must weigh this against the potential increase in value of shares in a (fast-growing) non-dividend-paying company.
• Diversification is king. Diversification reduces the risk of investing. By spreading your money around assets or companies where their performance is unrelated to each other (such as a tech company in one country and a manufacturing business in another), there is less chance of them both falling in value at the same time. Instead, your portfolio can ride out poor performance in one company because your other stocks may not be affected as badly, and may even benefit from the situation.
• There are plenty of tax breaks available. If you buy shares in the UK you have to pay tax on any gains you make from investing. However, there are some ways to reduce the tax burden. Investing through a stocks and shares ISA, for example, offers you an annual allowance of up to £20,000 worth of tax-free investments every year, or you can set up a SIPP (a Self-Invested Private Pension) which entitles you to further tax breaks.

Now we can dive into some more key questions you might want answered.

How much does it cost to buy and sell shares?

It’s possible to buy and sell shares for little or no cost with a platform like eToro . Services like this offer zero commission stock trading and are the best and most cost-effective way to start investing as a beginner.

However, the exact cost varies depending on the platform and the way you choose to invest. 

Traditional stock brokers like Hargreaves Lansdown and Interactive Investor charge a monthly subscription fee of between £5-10 and may also charge a trading fee on each share purchase.

A fee comparison of share dealing platforms

To buy shares, you need to sign up to a share dealing broker. That broker may charge you a fee for its services, in the form of trading charges when you buy shares online.

These fees may simply be a small charge each time you buy or sell shares in a company. The fees might be charged at a flat rate per trade, or they might be a percentage of the trade value.

Alternatively, there may be no trading fees and instead the charge is on the ‘bid offer spread’. This is the difference between the buy and sell price of an asset. Lower spreads are generally better for you. Some platforms make money by charging you more than they would pay for the asset themselves. 

To give you an idea of the costs involved in buying shares, here’s a comparison of the trading fees across top UK stock brokers.

Note that there may be other fees to pay as well, depending on how you invest. Some investment platforms charge inactivity fees, so you pay a fee if you don’t use the account for a certain amount of time (such as 3 months, 6 months, or a year).

You may also have to pay an annual fee if you invest in exchange traded funds, which usually charge a maintenance fee of between 0-1% per annum.

Do I have to pay tax on shares I buy in the UK?

Yes, UK shares are liable to both stamp duty and capital gains tax, while you may have to pay tax on any dividends you receive as well. 

There are ways to reduce the amount you have to pay. For example, if you own shares inside an ISA, then any investments up to £20,000 per year are tax-exempt.

Stamp duty

A stamp duty of 0.5% applies to all shares bought electronically, if the company is listed in the UK. The tax is charged automatically at the time of sale, so you don’t need to do anything.

Shares in foreign companies are not charged stamp duty but may be liable to other taxes, which we’ll cover in detail below.

Capital gains tax

When you sell your shares, you may have to pay a capital gains tax on any profit you make. The amount of tax you have to pay depends on how much money you make and which income tax bracket you fall into.

Each person receives a personal capital gains allowance of up to £6,000 per year, so the tax only applies if your capital gains exceed that amount. Above that amount, a capital gains tax applies depending on your tax band:

• Basic rate taxpayers: 10% 
• Higher rate taxpayers: 20%

It’s important to understand that the capital gains allowance doesn’t just include your investments, so if you sell any personal possessions (excluding your car or main home) or business assets, they count towards your allowance.

Any investments made inside an ISA are not liable to pay capital gains tax. For more information on capital gains tax, visit the UK government website.

Dividend tax

Dividends are taxed in a similar way to your annual income, so you don’t have to pay tax on them unless your wages plus dividend income exceeds your personal tax-free allowance (currently £12,750 per year).

Each person also gets a dividend allowance, so you don’t have to pay tax on dividends up to this amount. In the 2023/24 tax year, that’s £1,000.

Dividends over the allowance are charged according to your tax band:

• Basic rate taxpayers: 8%
• Higher rate taxpayers: 33.75%
• Advanced rate taxpayers: 39.35%

Any dividends from shares you hold inside an ISA are tax exempt.

Foreign taxes

If you live in the UK but buy stocks from another country, such as the US, the tax rules may be slightly different and you should contact HMRC (Her Majesty’s Revenue and Customs, the UK tax authority) or a qualified accountant if you need help.

The proceeds from foreign shares you own are generally liable to taxes in that country. However, the UK may have treaties with those countries to decide which government has the right to charge you tax first, and which may impact the amount you have to pay.

So, for example, if you are a UK resident, you have to fill out a W-8BEN form before you can buy US shares. This form entitles you to some tax relief and may reduce the amount of tax you have to pay on dividends and interest on those shares.

*This does not constitute tax advice. Please consult a qualified chartered accountant who is familiar with the tax laws where you live.

How do I pay for my shares?

You deposit money onto your share dealing platform, which then acts as your available cash on hand to pay for each transaction. 

Most stock brokers allow you to use bank transfers and card payments to make this deposit. Alternative payment methods like PayPal are usually accepted but the available payment options vary between brokers.

Here’s a list of accepted payment methods for each top broker.

Here are some detailed guides on how to buy shares with popular payment methods:

• How to buy shares with PayPal
• How to buy shares with Apple Pay
• How to buy stocks with Google Pay

Which stocks can I buy in the UK?

It completely depends on the platform you sign up to. There are thousands of publicly-listed companies around the world, but not every broker allows you to buy shares in every company.

Most brokers allow you to buy shares in the largest companies in the UK and the US. Think of the biggest brand names, like Apple, Amazon, and Tesla, along with major UK corporations like Unilever, Tesco, and HSBC. All of these are likely to be available on any platform you sign up to.

As a rule, any company that is part of a stock market index, like the FTSE 100 or the S&P 500 is available through any stock broker. These are collective terms for the 100 largest UK companies and the 500 largest US companies, respectively.

Things may become more tricky if you want to invest in emerging markets, in European or Asian companies, or in small, less well-known stocks from the UK or US. It’s certainly possible to buy shares in those companies, but you might need to shop around for a stock broker.

As a quick example, here are some examples of major stock exchanges. The vast majority of share dealing platforms allow you to invest in stocks that list on these exchanges:

• New York Stock Exchange (NYSE)
• NASDAQ Stock Exchange
• London Stock Exchange (LSE)

Here are some other popular exchanges for international shares, where you should check if the broker you choose allows you to invest in shares from there:

• Euronext (ENX)
• Shanghai Stock Exchange (SSE)
• Tokyo Stock Exchange (TSE)
• Stock Exchange of Hong Kong (SEHK)

How many shares should I buy?

The right answer depends on your budget and personal circumstances. Shares in the biggest companies tend to be the most expensive, so you buy one or two shares in a company like Google, or a number of smaller, less expensive stocks. 

We don’t advise that you put all your money into a single share or a single company. If you put all your money into a single share, then the performance of your investments is totally reliant on that one company. Any adverse impact to that company would affect your entire investment. 

Instead, it’s better to spread your money and buy multiple different shares, if you are able. Investing in more than one company is a way to benefit from ‘portfolio diversification’, a risk management strategy based on holding shares in assets whose prices rise and fall in response to different economic events.

Another way to achieve this same end is to buy fractional shares. Many share dealing platforms let you buy less than one share, which makes it easier to invest in lots of different companies without a large budget. Just note that if you invest in fractional shares, you may not receive dividends or the voting rights that come with owning a full share.

Should I buy shares?

Investing in shares is a great way to create an alternative source of income or build your wealth over time, but you should only do it with money you can afford to lose. 

Recent research has shown that the stock market trends up over a long period of time. It often beats holding money in a savings account, particularly during periods of low interest rates. If you are prepared to buy stocks and hold onto them through the short-term fluctuations, it can be a route towards financial freedom.

If you decide to invest in shares, then it’s just as important to choose the right place to do so. Finding the right share dealing platform can save you money in fees, while it’s crucial to pick one that is regulated. Regulated platforms protect any money you deposit up to the value of £85,000 under the UK’s FSCS (Financial Services Compensation Scheme) system.

What are the risks of investing in UK shares?

The biggest risk of buying shares is that you can lose all of the money you invest. The risk is enhanced if you put all your money into one company, or invest in lots of highly related companies where one negative event could impact them all (for instance, if you only buy shares in tech companies).

This applies to companies that are geographically related too. Investing in UK shares in particular exposes you to the fluctuations of the UK economy. If investors suddenly lose confidence in the UK stock market, or the government itself, then the value of all the shares on the London Stock Exchange might fall.

Another risk is of buying shares with leverage, which is like borrowing money from your broker in order to spend it on more shares than you could otherwise afford. If you do this and the price of your shares moves against you, it’s possible to lose all your money very quickly.

You should also consider whether you actually own the shares you buy in your own name. Some online platforms only allow you to invest in a derivative, such as a CFD, which merely tracks the price of a share, rather than giving you ownership of the asset itself. 

Legal shareholders have much greater protection in the event a company goes bust and its share price reaches zero.

Here are some of the main risks of investing in shares:

• The value of your investments can go down as well as up
• Your shares might fall in value because of the tribulations of the UK stock market
• You can lose money quickly or have a position liquidated if you buy shares with leverage
• You have fewer legal protections if you you buy share CFDs rather than the underlying stocks
• Your investment platform can run into difficulty or go bust

How to buy UK shares: a step-by-step guide for beginners

Follow this short guide to learn how to buy stocks for the first time. 

Where to buy shares UK

These are the best UK trading platforms, which allow you to buy shares in a low-stress, low-fee manner. They are all regulated brokers and provide investor insurance for your peace of mind.

4.6

eToro

Min. Deposit $100

Fees 1%

No. assets 3600+

Demo account Yes

Visit site

eToro review

eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.

4.5

Plus500

Min. Deposit $100

Fees From 2%

No. assets 2800+

Demo account Yes

Visit site

Plus500 review

82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

4.4

IG Markets

Min. Deposit n/a

Fees Spread only

No. assets 17000+

Demo account Yes

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IG review

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

When should I sell my shares?

This is the million dollar question, and it depends on whether you’re in it for the long term or looking to buy and sell shares rapidly to make lots of small profits. Either way, it’s best to set some rules for yourself in advance to take the emotion out of the decision. 

For example, when you first buy some stock, decide on a higher point at which you’ll sell those shares to lock in a profit and a lower one where you’ll sell to limit your losses.

You can instruct your broker to place take-profit and stop-loss orders automatically. They are merely limit orders that only execute if and when the price hits a certain level. You may consider scaling these orders, so that you sell some shares at one price, a few more at another price, and so on.

Bottom line

Buying a share allows you to own a small piece of a company. The price of each UK share fluctuates based on the performance of the company, how other investors feel about the business, and the success or otherwise of the UK economy as a whole. The goal is to buy shares at a low price, and sell them at a higher price.

It’s quite straightforward to buy shares, even as a beginner. All you need to do is sign up to a share dealing platform and deposit some money. You can buy as many or as few shares as you like, and they offer the possibility of an additional revenue stream as well as a means to grow your wealth over time.

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