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A share is a unit of ownership in a listed company. Share dealing lets you buy stock in companies large and small, such as Amazon, Google, or Microsoft, to potentially make a profit if you sell that stock after its price rises.

Share dealing is carried out through a share dealing account in which you deposit money, and make your trades using the money you've invested.

The different types of share dealing account

Brokers provide a link between you and the stock market that lets you buy and sell shares. Share dealing brokers come in three forms:

Execution-only brokers

--These brokers act on your instructions to buy or sell shares without offering any kind of advice.--

Advisory brokers

--These brokers provide advice about which shares you might wish to trade but leave the ultimate decision to you.--

Discretionary broker

--These brokers buy stocks and shares on your behalf based on their understanding of the market.--

There isn't a one-size-fits-all trading platform that'll work for everyone. Choosing the best share dealing platform for your needs depends on your individual circumstances, however, there are some key elements everyone should consider:

  • How often you buy and sell shares

  • How much experience you have with investing

  • The amount of money involved

What costs to look out for when you start share trading

Before you open a share-dealing account and start investigating how to buy stock, you need to think about costs.

Charge per trade

--Each time you buy or sell a stock, you usually pay a charge-per-trade fee. The amount varies depending on your account provider.--

Frequent-trader rate

--This is a discounted charge-per-trade fee that is triggered after you make a certain amount of trades. It's worth looking for if you trade a lot.--

Platform fee

--Charge made for holding the account. Some accounts don't have platform fees but have higher per-trade fees instead.--

Which are the best shares to buy

There are a few ways that you can earn money when trading stocks.

  • Growth: With this strategy, you buy shares and hang on to them until they hopefully increase in value. Once you've reached your goal price, you can sell the shares at a profit.

  • Dividends: With this option, you buy stock in the hope of receiving dividends (a regular share of the company's profits). Not all companies pay dividends, and some only pay them now and then, so you need to research the best stock options to support this approach. With companies that do pay dividends, payouts usually occur a few times each year. How much you get depends on how many shares you own and how the company has performed.

  • Day trading: This is a form of trading when you buy and sell shares over the course of a single trading day by taking advantage of small fluctuations in the prices of shares during the period. This is a high risk activity that's best for experienced traders.

You will not need to pay tax on your profit or purchases if your shares are held in an ISA or SIPP. If they are not, you may need to pay two forms of taxes.

Stamp Duty Reserve Tax (SDRT). This charges 0.5% of the trade's value if you buy UK shares that are settled through CREST (the UK electronic settlement system). If you buy shares using a stock transfer form rather than electronically and the transaction is over £1,000 you pay Stamp Duty at 0.5%.

Capital Gains Tax (CGT). When you sell your shares and make a profit, you are required to pay tax on the gains you made. The rate at which CGT is charged depends on which income tax bracket you are in and how much money you make from the sale.

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About the author

Lucinda O'Brien profileLucinda O'Brien
Lucinda O'Brien has spent the past 10 years writing and editing content for regional and national titles. She applies her industry knowledge to ensure readers can make confident financial decisions.

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