Purchasing American stocks from the UK is a great way to diversify your portfolio and gain access to some of the world’s largest and most innovative companies. This blog covers everything a UK citizen needs to know to start investing in the U.S. stock market.

Set Up Your Broker Account

Selecting the correct brokerage account is the first step in investing in U.S. stocks. If you live in the UK, you have two main choices:

Access to U.S. stock exchanges is now available through several well-known UK investment platforms. Because they frequently handle currency translation internally, it can be convenient and keep your investments within a familiar regulatory context. Hargreaves Lansdown, Interactive Investor, and Freetrade (for a more constrained selection) are a few examples.

Brokers in the U.S. that take on clients from other countries: Some sizable U.S. brokerage houses serve non-U.S. citizens, such as Interactive Brokers and Charles Schwab International. These may require more complicated account setup and tax paperwork, but they often offer a broader selection of US-specific investment products and potentially lower trading fees.

Things to consider:

• Examine platform costs, inactivity fees, trading commissions, and foreign exchange (FX) conversion fees.
• When choosing an investment, ensure it provides access to the specific U.S. stocks that pique your interest.
• Do they give U.S. businesses access to reliable research and analysis tools?
• Can foreign clients receive prompt and helpful assistance from them?
• Verify that the broker is governed by the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) in the U.S. (if headquartered in the U.S.) and/or the Financial Conduct Authority (FCA) in the UK (if based in the UK).
• Following your selection, the account opening procedure usually includes completing a W-8BEN form (described below), presenting identification (such as a passport or driver’s license), and proving your address.

Understand The Tax Implications

For UK investors in U.S. stocks, this is a significant move. When opening your broking account, you will need to fill out a form called the W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting). You affirm that you are not a U.S. tax resident by completing this form. This is important because, under the US-UK double taxation treaty, it enables you to claim a lower withholding tax on dividends paid by U.S. corporations, often from the default 30% to 15%.

Any dividends you get and any capital gains you make from selling U.S. equities are taxable in the UK. You will be required to pay CGT on any excess gains from the sale of investments that are above your yearly CGT limit. Although there is a tax-free dividend allowance, dividends from U.S. equities are still considered income and are subject to UK income tax at your marginal rate.

To properly determine your tax obligations, it is strongly advised that you maintain thorough records of all of your transactions, including the dates, costs, and any associated fees. For complicated circumstances, it is best to speak with a tax expert who specialises in foreign investments.

Our next blog will be part two!

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