Cost of buying US shares?
Asked by colinwest99 on 29 October 2011
[Investment | Shares]
I'm familiar with the cost of buying and selling UK shares ie stamp duty, dealing cost, capital gains (via Halifax).
What is the case with US shares eg Microsoft, Walmart?
Answered by Justin on 03 May 2012
Let's look at each cost in turn.
Some UK online stockbrokers now offer US share dealing at the same price as UK shares, so the dealing fees can, in theory be the same. For example, Halifax Sharedealing charges a fixed £11.95 per trade.
There's no UK stamp duty to pay when buying US shares and the US doesn't have an equivalent tax. However, you'll incur some foreign exchange charges, as the shares must be bought and sold in US dollars. For example, Halifax adds a 1% margin to the exchange rate, so buying then subsequently selling the shares will effectively cost you 2%.
Also bear in mind that currency movements will affect the value (in £) of your shares. For example, buy $1,000 of shares at an exchange rate of £1 = $1.6 and it'll cost you £625. If the exchange rate moves to £1 = $1.5 you'll make a £42 profit, but if the pound strengthens to £1 = $1.7 you'll lose £37.
Tax on dividends and gains is subject to tax in the UK, not the US. However, the US normally withholds 30% tax on dividends unless you complete form W8-BEN (which should be supplied by your stockbroker), in which case it's reduced to 15% and deemed to be paid net of UK basic rate tax by HMRC. So you can make your income and capital gains tax calculations as normal.