To invest in shares in the UK you open an account with a firm authorised by the Financial Conduct Authority, choose the wrapper it sits in (a stocks and shares ISA, a self-invested personal pension or a general investment account), pay money in and buy shares on a stock exchange through that account. The main costs are the firm’s dealing and account charges, currency conversion on overseas shares and stamp duty reserve tax of 0.5% when you buy most existing shares in UK companies (GOV.UK).
The mechanics take an afternoon. The harder part is deciding how much of your money belongs in individual shares at all, and how to spread it. This guide covers both, and links to the desk’s deeper explainers.
What a share is
A share is a unit of ownership in a company. It gives you a claim on part of the company’s future profits, usually a vote at its general meetings and any dividends the board decides to pay. It does not give you a claim on a fixed amount of money. If the company does well the share price may rise and dividends may grow; if it fails, shareholders are paid only after lenders and other creditors, and often receive nothing.
That is the trade at the heart of share investing: higher potential returns than cash or bonds over long periods, in exchange for the risk of large falls and the possibility of losing the whole amount invested in any one company.
How the market works
Companies raise money in the primary market when they first sell shares to investors, at a flotation or a later share issue. Subscribing for new shares does not attract stamp duty or SDRT (GOV.UK). After that, shares change hands in the secondary market: you buy from, and sell to, other investors through a broker, and the company receives nothing.
Every share has two prices at any moment: the bid (what buyers will pay) and the offer (what sellers will accept). The gap between them is the spread, and it is a cost each time you trade. Shares in large, heavily traded companies tend to have narrow spreads; small and thinly traded companies can have wide ones.
In the UK a company’s shares are either listed, meaning admitted to an official list on a recognised stock exchange, or admitted to trading on a growth market such as AIM, which HMRC recognises as a growth market for stamp duty purposes (HMRC). After you buy, the trade settles, meaning cash and shares change hands, a set number of business days later. The UK is due to move to settlement one business day after the trade (T+1) from 11 October 2027 (HM Treasury).
Step one: choose the wrapper
The wrapper decides the tax, so choose it before the shares.
| Wrapper | Limit, 2026 to 2027 | Tax on dividends | Tax on gains | Access |
|---|---|---|---|---|
| Stocks and shares ISA | £20,000 a year across all your ISAs | None | None | Any time |
| Self-invested personal pension (SIPP) | £60,000 annual allowance for tax-relieved contributions | None while invested | None while invested | Pension age; tax paid on withdrawals |
| General investment account | None | £500 allowance, then 10.75%, 35.75% or 39.35% | £3,000 exempt, then 18% or 24% | Any time |
Sources: ISA allowance, dividend tax, tax when you sell shares, pension annual allowance, Finance Act 2004, section 186, Taxation of Chargeable Gains Act 1992, section 271, tax on pension withdrawals, CGT allowance and CGT rates.
A stocks and shares ISA can hold “shares in companies” (GOV.UK). You cannot move shares you already own outside an ISA straight into one, except shares from an employee share scheme; they have to be sold and bought again inside the ISA (GOV.UK). Our guide to tax-efficient investing in the UK covers how the wrappers fit together.
Step two: check the firm
Use a firm authorised by the FCA and check it on the FCA’s register before sending money. The FCA’s Warning List names firms it is “concerned are working without our permission”, including clones of genuine firms. If an authorised investment firm fails, the Financial Services Compensation Scheme can pay up to £85,000 per person, per firm for failures after 1 April 2019; it does not pay out for poor investment performance (FSCS). Our guide on how to spot an investment scam lists the warning signs.
Step three: know the costs
| Cost | What it is | Figure |
|---|---|---|
| Stamp duty reserve tax | Tax on electronic purchases of existing shares in UK companies, and in foreign companies with a UK share register | 0.5% of the price |
| Stamp duty | Tax on purchases made with a paper stock transfer form, if over £1,000 | 0.5% |
| Depositary receipt or clearance service transfers | Higher rate on transfers into some schemes | 1.5% |
| Growth market shares | Shares on a recognised growth market such as AIM and not listed on any market | Exempt since 28 April 2014 |
| Dealing charge | The firm’s fee for each trade | Set by the firm |
| Currency conversion | Charged when you buy or sell overseas shares from a sterling account | Set by the firm |
| Account or platform fee | Charged for holding your investments | Set by the firm |
| Spread | Gap between buying and selling prices | Varies by share and time of day |
Sources: GOV.UK for stamp duty and SDRT; HMRC Stamp Taxes on Shares Manual, STSM041270 for growth markets.
SDRT is charged on purchases, not sales, and foreign shares bought outside the UK do not normally attract it (GOV.UK). The FCA requires investment firms to give you an estimate of all costs before you invest and an annual statement of what you actually paid, in pounds and as a percentage (FCA Handbook, COBS 6.1ZA.14B). Small, frequent trades are where fixed dealing charges bite hardest.
Step four: place the order
- Market order. Buys or sells at the best price available now. Fast, but the price can move between quote and execution in a thinly traded share.
- Limit order. Sets the highest price you will pay or the lowest you will accept. It may not be filled if the market does not reach your limit.
- Contract note. The record of every trade: price, number of shares, charges and any stamp duty. Keep it for tax.
Diversification: why one share is never enough
A single company can fall a long way for reasons nobody saw coming, and a handful of shares in one sector can fall together. Spreading money across companies, sectors and countries reduces the damage any one of them can do. Even a broad index is concentrated: the 10 largest companies made up 27.85% of the MSCI World index on 30 September 2026 (MSCI factsheet). Many investors hold a core of funds and add individual shares around it. Our guide to index funds for UK investors explains what to check before buying one.
Tax outside a wrapper
In a general investment account for 2026 to 2027, dividends above the £500 allowance are taxed at 10.75%, 35.75% or 39.35% depending on your income tax band (GOV.UK), a rise of 2 points for basic and higher-rate taxpayers from 6 April 2026 (HMRC). Gains above the £3,000 annual exempt amount are taxed at 18% within the basic rate band and 24% above it (GOV.UK). Our explainer on dividend investing after the 2026 tax rise covers income shares in detail.
A short glossary
- Bid and offer: the prices at which you can sell and buy.
- Dividend: a cash payment from a company’s profits to shareholders, decided by the board and never certain.
- Dividend yield: the yearly dividend as a percentage of the share price.
- Ex-dividend date: the date from which a buyer no longer gets the next declared dividend.
- Market capitalisation: share price multiplied by the number of shares in issue.
- Price to earnings ratio: share price divided by earnings per share, a rough gauge of how the market values a company’s profits.
- Rights issue: an offer to existing shareholders to buy new shares, usually at a discount.
- Short selling: selling borrowed shares in the hope of buying them back cheaper; see short selling explained.
- SDRT: stamp duty reserve tax, 0.5% on most electronic purchases of existing UK shares.
Past performance is not a guide to future returns. Share prices can fall as well as rise and you may get back less than you invest.
