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Best Share Dealing Accounts

Updated On: Apr 9, 2021

Best Share Dealing Accounts

Contents:

What is Share Dealing

Share dealing or stock trading is a way to buy and sell shares in publicly listed companies.


Publicly listed companies are companies that are listed on a stock exchange, such as the London Stock Exchange or the New York Stock Exchange.


To trade shares, you need to open a share dealing account with an investment platform. A share dealing account can be an individual savings account (ISA), general investment account (GIA) or pension account.


How to buy Stocks and Shares

There are two ways to buy shares. You can either buy individual company shares directly (through a stockbroker) or invest in a fund (which pools money from you and other investors to buy lots of shares). 


Depending on the amount you have to invest and your investing savviness, funds tend to be a cheaper and less risky way to invest in shares as you'll be spreading the costs and risks with other investors in the fund.

The first opportunity you'll have to invest in shares is when the shares are created and offered to the public for the first time. This is called an Initial Public Offering (IPO) or 'Going Public.' Companies go public to raise money to fund their activities. 


Once shares are created, they can be bought or sold on the stock exchange. This is called the secondary market because it comes after the IPO.

Most investment platforms are online and will allow you to invest regularly (e.g. £25 per month) or occasionally (e.g. a lump sum of £1,000).


Whether online or offline, you need the services of a stockbroker or share dealing platform to buy shares. Stockbrokers offer three types of services - execution-only, advisory or discretionary. 


You can open a share dealing account (ISA, SIPP or general investment account) with the platform you choose.


How to pick Stocks

Deciding what shares to buy can be intimidating, but it doesn't have to be. We've summarised our top five methods below:


  1. Research: Investing in shares requires knowledge about the companies you are interested in. The best way to acquire such knowledge is through research. Websites like Motley Fool, ADVFN, Hargreaves Lansdown, Interactive Investor and Citywire provide company news, analysis, and commentary.

  2. Economic Cycles:‍ ‍The global economy will grow and shrink over time. When the economy is growing, most sectors tend to do well. But when the economy is shrinking and things aren't as rosy, only certain sectors continue to do well. Industries that produce or sell everyday essentials such as food, beverages and pharmaceuticals tend to do well in every economic climate. In comparison, industries such as retailing and aerospace that provide non-essential products or services tend to mirror the health of the economy. Understanding these cycles can help you decide what shares you buy and when.


  1. Future Predictions: If you can make predictions about how the world will change in the next 10 to 20 years and what industries are poised to benefit from this change, you can begin to invest in stocks and shares accordingly. For example, how will climate change affect energy companies and automobile manufacturers in the next 10 or 20 years? What changes do you anticipate in online retailing, financial services and healthcare?

  2. Favourite Brands‍: ‍It might be worth looking at and researching brands you know, love and use often. The world's biggest, popular and most loved brands tend to be the most profitable.

  3. Diversification: When picking shares, it is risky to invest in just one company. If the company gets into difficulty, you could lose all you invested. It is better to build a diversified portfolio. This means you should consider investing in multiple companies, across different industries and in various geographies. Most people, including experienced investors, use funds when investing. Funds give you access to a diversified portfolio, saving you the trouble of buying shares in multiple companies.

Share Dealing Charges

Share dealing platforms charge several fees for using their services. The main fees are the annual platform charge, dealing charge, transfer out charge and inactivity charge.


  1. Platform Charge: Share dealing platforms charge this fee for providing a platform for you to buy and sell shares. It can be a fixed fee or a percentage-based fee.


  1. Dealing Charge: It is also known as a trading fee. This is the fee for buying and selling shares or other types of investments on the platform. Discounts are usually available for regular investors.

  2. Transfer Out Charge: ‍It is also called an exit fee. It is the fee you pay for moving your investments from one provider to another.


  1. Inactivity Charge: Most platforms don't charge this, but those that do usually charge you for making less than a certain number of trades within a specified period.
  2. Stamp Duty: When you purchase UK shares, you'll pay a 0.5% stamp duty to the government and an extra £1 on transactions above £10,000. Stamp Duty on Irish companies is 1%. You do not pay Stamp Duty on AIM stocks or Exchange-Traded Funds (ETFs).


Best Share Dealing Accounts

Compare our best share dealing accounts below. To make sense of the charges, use our share dealing charges comparison table.


Capital at risk.


AJ Bell Youinvest - Cheap if you make 10+ trades per month

AJ Bell Youinvest
Annual Platform Fee
0.25%
(max £3.50 per month)
Dealing Charge
£9.95 - £4.95
Regular Investor Charge (Online)
£1.50 per deal

AJ Bell Youinvest offers a wide range of investments, including stocks and shares, over 2,000 funds (unit trusts and OEICs), ITs and ETFs. Its products include Stock & Shares ISA, Lifetime ISA, Junior ISA, SIPPs, etc.

*Affiliate Link
go to site

Interactive Investor - One free trade every month; Lots of research

Interactive Investor
Annual Platform Fee
£120 - £240
Dealing Charge
£7.99 - £3.99
Regular Investor Charge
No charge

Interactive Investor has more than 40,000 investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. You get a free trade every month, which you can use to buy or sell any investment. The site has lots of expert ideas, research and insights, which can be helpful when choosing investments. Interactive Investor offers Stocks and Shares ISA, pension and Junior ISA.

*Affiliate Link
go to site

Hargreaves Lansdown - Expert financial guidance, research and tips

Hargreaves Lansdown
Annual Platform Fee
No charge
(Fund & Share Account)
Dealing Charge
£11.95 - £5.95
Regular Investor Charge (Online)
£1.50 per deal

Hargreaves Lansdown is the biggest player in the market. It does not charge a platform fee on its Fund and Share Account but charges 0.45% (capped at £45 a year) on its ISA and 0.45% (capped at £200 a year) on its SIPP. It offers most products, including Stock & Shares ISA, Lifetime ISA, Junior ISA, SIPPs, etc.

go to site

IWeb - No platform fee; Cheap share dealing

IWeb Logo
Annual Platform Fee
No charge
(£100 one-off account opening fee)
Dealing Charge
£5
Regular Investor Charge
‍‍
N/A

IWeb is part of Lloyds Banking Group and operated by Halifax Share Dealing. It has a wide range of shares, funds, ETFs and investment trusts. Share dealing is cheap, and you pay no platform fee. Services include Stock & Shares ISA, Junior ISA, SIPPs, etc.

go to site

X-O - No platform fee; Cheap share dealing

X-O
Annual Platform Fee
No charge
Dealing Charge
£5
Regular Investor Charge
N/A

X-O is an affordable execution-only online share-dealing platform. Its services include Stock & Shares ISA, Junior ISA, SIPPs, etc.

go to site


To make sense of the charges, use our share dealing charges comparison table.

Tax on Stocks and Shares

When you sell shares or other investments, you may have to pay Capital Gains Tax if you make a profit (gain). You may need to pay tax on:

  • shares that are not in an ISA
  • units in a unit trust
  • certain bonds (not including Premium Bonds and Qualifying Corporate Bonds)


You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance. 


This tax year, the Capital Gains tax-free allowance is £12,300. Additionally, the first £2,000 you receive in dividend is tax-free.

Stock Market Terms

Here a few common stock market terms you should know:


  1. Bid Price: The price you can sell a share.
  2. Offer Price: ‍The price you can buy a share.
  3. Bid-Offer Spread‍: The difference between the bid and offer price.
  4. FTSE 100: ‍An index of the 100 largest companies on the London Stock Exchange (LSE).
  5. FTSE 250: ‍An index of the next 250 largest companies on the LSE.
  6. FTSE All-Share‍: ‍An index of all shares listed on the LSE's main market, including all shares in the FTSE 100, FTSE 250 and FTSE Small-Cap indices.
  7. Dividend‍: A dividend is your share of a company's profit. When a company whose shares you own makes a profit, they might send some of it to you. This is called a dividend.
  8. Dividend Yield‍: This shows you the portion of a company's share price paid out in dividends. It is calculated as the dividend per share divided by the price per share. For example, if a company paid a dividend per share of 7p and the share price was 100p, the dividend yield would be 7%.
  9. Market Capitalisation: Also called market cap. This is the value of a company based on its current share price. It is calculated as the total number of a company's outstanding shares multiplied by the current share price.
  10. Price to Earnings Ratio‍: You can use this ratio to compare similar companies. A lower PE ratio could imply that a company is of better value. But it could also highlight a company with poor future prospects. It is calculated as the share price divided by the profit per share.


Frequently Asked Questions

1. What is a share?

A share is a unit of equity ownership of a public company. When you buy a share, you own a small unit of a public company.


If you bought a share in Apple, for example, you would become a part-owner of Apple. If it performs well, you will benefit from its success. If it doesn't, you may lose some money. 


Companies issue shares to raise money to fund their activities. People invest in shares to benefit from the successes of companies they believe in. 


You may also come across the word stock or equity. In most situations, stocks, equities and shares refer to the same thing. Stocks could also mean all your shares in one or more companies.


2. Why invest in stocks?

Investing in stocks and shares can be a great way to grow your money and can offer you higher long-term returns than leaving your money in a savings or current account. There are two ways you could benefit from investing in shares:


  1. Capital Gains
    If the company performs well and the value of your shares rises, you'll make a nice little profit if you choose to sell your shares at the new price. This profit is called a capital gain.

    Here's an example: Suppose you bought 100 shares in a company at £10 per share (usually listed as 1000p). The total value of your investment will be £1,000. If the price of your shares rises to £12 and you decide to sell your entire shareholding, you'll sell it for £1,200, making a capital gain of £200.

  1. Dividends
    You might also receive regular income from the companies you invest in when they make a profit. This income is called a dividend. A dividend is your share of the company's profit. 

    Suppose the company in the example above paid you a 5% dividend before you sold your holding. You would have received an income of £50. This would bring your total gains (dividend and capital gain) to £250.

    Additionally, as a shareholder, you might receive shareholder perks (such as discounts on the company's products or services) and opportunities to attend and vote at shareholder meetings.


3. What is the stock market?

The stock market is a marketplace where shares and other assets are bought and sold.


There are several stock markets around the world, and in the UK, the main exchange is the London Stock Exchange (LSE). The LSE offers trading in shares from big names you'd have heard of, such as Vodafone on its main market to smaller companies such as ASOS listed on the Alternative Investment Market (AIM), its junior market. 


Anyone can buy shares on the London Stock Exchange, but you need to go through a stockbroker.


4. What is a market index?

An index is a group of shares of companies representing a particular market segment. These companies are usually grouped by size and value. 


In the UK, the main indices are the FTSE 100 (an index of the 100 largest companies on the LSE), the FTSE 250 (an index of the next 250 largest companies) and the FTSE All-Share (an index of all shares listed on the LSE's main market).


Indices are used as benchmarks to gauge the movement and performance of market segments. For example, the FTSE 250 can be used to gauge the fortunes of the UK economy.


5. Why do stock prices change?

Share prices are initially set by the company issuing the shares and subsequently determined by demand and supply. 


Demand means the number of people who want to buy the shares, and supply means the number of people who want to sell. While there is no perfect equation that tells us exactly how share prices will behave, several factors can affect demand and supply, such as:


  • The company's financial performance;
  • The health of the UK or global economy;
  • The company's operations such as changes in its top-management or business strategy;
  • The competition. For instance, if fizzy drinks are struggling, it could mean people are drinking something else, perhaps healthier drinks. So, companies that produce healthy drinks could be in line to profit.

6. What is the best online stock trading site for a beginner?

The best online stock brokers for beginners in the UK:


7. What is the best share dealing account in the UK?

The best share dealing accounts in the UK:


Use our share dealing charges comparison table to get a sense of how each platform charges for regular investing and ad hoc share trading.


You might also like 🤓

  1. Best Stocks and Shares ISA
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  5. Compare Robo Advisors
  6. Investing for Beginners
  7. Auto-Investing Apps

Credits

  1. Gov.uk

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