Opening a Share Dealing Account is an easy process, but selecting a provider and understanding the cost of buying and selling shares needs consideration.
Is a Share Dealing Account for You?
Maxing out your Stocks & Shares ISA allowance first and then opening a Share Dealing Account is the general rule of thumb. This is because a Stocks & Shares ISA protects your income and capital gains (profit) from the taxman.
However, if you have maxed out your Stocks & Shares ISA or are likely to trade very frequently, a Share Dealing Account may be the one for you.
Selecting a Provider: Putting your Requirements First
The value you spend on shares and how often you are likely to buy and sell shares (or trade) are key considerations in selecting an online broker or online platform.
Providers of online share dealing services are high in number. Some high-street banks offer share dealing accounts although the most common is Online Brokers or Online Platforms. Providing you a with a DIY or ‘execution only’ service.
This means you select your shares you want to buy or sell and the Platform will transact it for you.
Understanding the Online Broker Charges
Most if not all Share Dealing Account providers will base the price of buying or selling shares (dealing) on a fixed fee per trade. The higher the number of deals you conducted the previous month, the lower the fixed fee is. It’s like buying in bulk – the more you buy, the lower your dealing charge will be. You’re looking at around £12 per deal and scaling down, depending on volume.
Some will also charge what is known as ‘platform fee’ or an account administration charge, but you will see less of those around in today’s market.
Other charges levied by the Online Broker may be on the scheduling of regular investments including automatic reinvestment – for example if you want to reinvest dividends received into purchasing more shares.
Other Charges to Consider – Capital Gains Tax & Stamp Duty
Shares that are not in an ISA are liable to Capital Gains Tax, however shares held in a Share Dealing Account are. If you have made a profit, you will have to consider completion of a self-assessment form.
Buying shares is also subject to a Stamp Duty Reserve Tax of 0.5%.
If you purchase US or Overseas shares then you will experience further costs in terms of currency conversions and tax.
Details needed to Open an Account
Fairly standard – as you’d expect, you will need to provide your name, address, bank account details and e-mail address. Further verification may also be needed in the form of a passport.
The process is fairly quick – but importantly you need to credit your account, this can be done with a debit card or a credit card, the latter will be subject to fees.
Buying, Withdrawing Money & Closing your Account
Have opened your account, you will now be able to buy and sell shares of your choice. It really is as easy as searching for a share and following the instructions to buy. You can also transfer shares in from a different broker should you wish to as well as transfer them out. However, some will charge a fee to transform outside of their platform.
Withdrawing money from your account is another simple process – and can just go back to the debit card you credited your account with.
And finally, if you are looking to close your account you may also be subject to some minor fees. Likewise, you may incur transfer fees if you are transferring your portfolio to another provider.