Best UK Share Dealing Accounts 2021

1 April 2020 | Updated: 11 June 2021

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If you’re based in the UK and you wish to invest in the stock markets, you will need to open a share dealing account. They are hosted by online stockbrokers that have direct access to publically listed companies. In return, you will need to pay a fee every time you make an investment.

This is typically charged when you buy or sell a stock and can either be variable or fixed. Nevertheless, with hundreds of share dealing accounts now available in the UK, you need to choose a platform that best meets your long-term investing goals.

As such, we would suggest reading our guide on the Best UK Share Dealing Accounts of 2021. Not only do we unravel the best five platforms currently in the market, but we also provide some handy tips on what you need to consider prior to opening an account.

Note: If you’re looking to invest in shares, then you need to be prepared to ride out some bumpy waves. The general rule of thumb is to hold onto your investment for at least five years.

Table of Content

    What are Share Dealing Accounts?

    In order to buy and sell shares online, you will need to use a stockbroker. When you open up an account with a stockbroker for this purpose, you’ll be opening a share dealing account. It is important to note that share dealing accounts are not used to only buy and sell stocks. On the contrary, they also permit investments into mutual funds, bonds, ETFs, and indices.

    As such, your share dealing account is a one-stop-shop for your entire investment portfolio. In terms of the fundamentals, most share dealing accounts operate in the same way. For example, you’ll need to open an account, verify your identity, and then deposit funds. After that, you will then be required to choose your investments on a DIY basis.

    This means that you will need to have an element of knowledge in the stock markets to be able to identify viable companies. With that said, newbie traders are probably best to stick with mutual funds, as the fund will pick and choose which assets to invest in.  In return, you’ll pay an annual maintenance fee, albeit, the investment is 100% passive.

    When it comes to fees, share dealing accounts usually come with a variable or fixed trading commission. Regarding the former, you’ll pay a percentage of the amount you invest. For example, a £1,000 investment in Apple shares at 1% would cost you a fee of £10. If it’s a fixed fee, the commission will remain the same regardless of how much you invest. More on this later.

    Pros and Cons of Share Dealing Accounts

    The Pros

    • Buy and sell stocks and shares from the comfort of your home
    • You can invest in other assets like mutual funds, bonds, and indices
    • Fees are now super-competitive for retail clients
    • Dividends are paid directly into your share dealing account
    • Connect your share dealing account to an ISA
    • It takes no more than 10 minutes to open an account
    • Deposit and withdraw funds with a debit or bank account
    • UK accounts are regulated by the FCA

    The Cons

    • Inability to short-sell assets or apply leverage
    • You need to choose your own investments
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    Types of Investments in a Share Dealing Account

    As the name suggests, a share dealing account allows you to invest in shares. However – and as we noted above, you can also invest in a range of other asset classes.

    Below we have listed the most common investment types that share dealing accounts permit.

    ✔️ UK-Listed Shares

    The obvious starting point is companies publically listed in the UK. If they are, they’ll likely be listed on the London Stock Exchange. Think along the lines of British American Tobacco, BP, Barclays, and Lloyds. Most share dealing accounts will give you access to the entire library of FTSE 100 companies, so there’s plenty of opportunities to diversify.

    Similarily, share dealing accounts often give you access to the AIM. For those unaware, this is a UK-based stock exchange that lists small-to-medium companies that aren’t quite large enough for the London Stock Exchange. Stocks on the AIM are often volatile and suffer from lower levels of liquidity, so do bear this in mind.

    ✔️ International Shares

    If you’re looking to diversify into non-UK markets, you’ll be pleased to know that most share dealing accounts permit this. In most cases, the broker will give you access to the two US major stock markets – NASDAQ and the New York Stock Exchange.

    This is how you will be able to invest in companies like Apple, Facebook, Ford Motors, Disney, and Nike.  It is important that you check the fees surrounding international stock investments. You might also need to pay an additional fee to cover the costs of investing in a currency other than GBP, too.

    ✔️ Index (Indices)

    Indexes (or Indices) allow you to invest in the wider stock markets without having to choose individual companies. In the UK, the leading index is that of the FTSE 100. For those unaware, this consists of the 100 largest publicly-listed companies on the London Stock Exchange.

    So, instead of having to buy 100 individual shares, you can invest in all 100 companies via a single trade. The most liquid index in the world is the S&P 500, which tracks the 500 largest companies listed in the US. Then you have the Dow Jones, which tracks 30 large companies from a range of different sectors.

    ✔️ Mutual Funds

    If you’ve got virtually no experience or knowledge of investments, then we would suggest considering a mutual fund. In a nutshell, mutual funds buy and sell assets on behalf of their investors. By pooling your money together with thousands of other investors, this gives the fund a multi-billion pound war chest.

    Although you will be required to pay a small maintenance fee when investing with a mutual fund, it’s well worth the price. For example, the fund will consist of a team of highly experienced investors, who will be fully supported by cutting-edge technologies. Moreover, the fund is actively managed, so you get to enjoy the fruits of passive income.

    ✔️ Bonds & Gilts

    An additional stream of passive income that a share dealing account can facilitate is that of bonds and Gilts. Bonds require a lump-sum investment and in return, you’ll receive fixed interest payments until the bonds mature. When they do, you’ll receive your initial investment back in full.

    Gilts work in exactly the same way as bonds, albeit, they are issued by the UK government. As such, although they are virtually risk-free, the yields on offer are super-low.

    How do Share Dealing Accounts Work?

    The process of owning shares isn’t as simple as logging into your online stockbroker account and making a purchase. Well, it is for you – but not for the broker itself. This is because much goes on behind the scenes. At the forefront of this is the broker’s relationship with the primary markets.

    • You see, in order to be able to sell stocks on a share-by-share basis, the broker will need to meet a minimum lot size.
    • For example, let’s say that the broker wants to distribute British American Tobacco shares to its clients.
    • The broker might be required to purchase £500,000 worth of shares in order to get access to the primary market and thus – pay the same rates as the institutional space.
    • They will then be able to sell British American Tobacco stocks via its share dealing accounts, adding a slight mark-up along the way.

    It is also important to note that a number of new-age brokers now allow you to purchase fractional shares. This not only allows you to make an investment without breaking the bank, but it makes the diversification process much easier.

    Share Dealing Accounts: Fees and Commissions

    Share dealing account brokers are in the business of making money, so you will need to pay a fee when making an investment. This typically comes in the form of a variable commission or a flat fee. It is important that you know the difference between the two, not least because this should dictate the type of share dealing account that you sign up for.

    🥇 Variable Commission

    If the share dealing account broker charges a variable commission, then your fees will be calculated against the size of your investment. For example, let’s say that the broker charges 2% per trade and you wish to invest in BP shares.

    1. You purchase £5,000 worth of shares in BP
    2. At a commission of 2%, this amounts to a fee of £100
    3. Four years later your £5,000 BP investment is now worth £7,500, so you decide to sell the shares
    4. At a commission of 2%, a £7,500 sale would amount to a fee of £150

    As you can see from the above, variable commissions are charged at both ends of the trade – when you buy and when you sell. Crucially, you should opt for a variable fee structure if you only plan to trade small amounts. Otherwise, larger investments will get penalized with super-heavy fees.

    🥇 Flat Fee

    If the share dealing account broker charges a flat fee, then the fee will never change. Whether you invest £1 or £10,000 – you’ll always pay the same. This could be anything from £5-£12 per trade, so it’s best to shop around. We normally find that low fee brokers typically offer a skin and bones service.

    In other words, you’ll be able to buy the shares you wish to invest in, albeit, you won’t get anything in the form of research, educational tools, or top-notch customer support. A flat fee structure is best suited for those of you that plan to invest large amounts. This will keep your online trading costs to an absolute minimum percentage-wise.

    Other Fees to Consider

    • Annual Maintenance Fee: If you decide to chase passive income via a mutual fund, you will all-but-certainly need to pay an annual fee. This is rarely more than 1% per year, and it’s charged against the total value of your investment.
    • Platform Fee: A platform fee is different from a mutual fund maintenance fee, as it’s a fee charged directly by the broker.  This is a fee that you need to pay to use the platform, and it’s usually charged on a quarterly or annual basis.
    • International Markets: Unlike CFD platforms, share dealing account brokers will likely charge you a fee to access international markets such as the New York Stock Exchange or NASDAQ.
    • Currency Conversion:  If you decide to invest in an asset class that is not denominated in GBP, then you will need to pay a currency conversion fee.

    How to Open a Share Dealing Account

    If you’re ready to start your investment journey by opening an account today, we are now going to show you what you need to do

    Step 1: Choose a Share Dealing Account Broker

    You will first need to choose an online stockbroker that offers share dealing accounts to UK investors. If you don’t have time to research a broker yourself, we would suggest opting for one of the five platforms we’ve listed further down in our guide.

    If you do have time, you need to consider a range of factors before signing up. This should centre on regulation, fees, commissions, payment methods, and the types of assets you can invest in.

    Step 2: Open a Share Dealing Account

    You will now need to open a share dealing account with your chosen broker. In order to comply with UK anti-money laundering laws, the broker will need to collect some personal information from you.

    This includes:

    • First and Last Name
    • Date of Birth
    • Current Address
    • Nationality
    • Driver’s License Number (If Applicable)
    • National Insurance Number
    • Contact Details

    If you’re wondering why the broker is required to collect so much information, this is because they will attempt to verify your identity electronically. If they are unable to do this via third-party sources, you might be asked to upload a copy of your passport or driver’s license, as well as a proof of address.

    Step 3: Fund Your Share Dealing Account

    Once you’ve got your share dealing account set up, you will then need to fund it. Some online brokers will ask you to deposit a small amount via your bank account. This is to verify that you are the true owner of the account, and to avoid any delays when it comes to making a withdrawal further down the line.

    If this is the case, the broker will provide the bank account details that the funds need to be transferred into. Alternatively, some online brokers will allow you to deposit funds with your debit card. This usually results in the funds being credited to your account instantly, although limits are usually much lower in comparison to a bank transfer.

    Step 4: Choose Your Preferred Investment Class

    Now that you have a fully funded brokerage account, you will now need to think about what investments you wish to add to your portfolio.

    If you’re looking to choose your own companies to invest in, simply search for the specific equity in the search box.

    Alternatively, if you want to invest in other investment products – such as bonds, indices, or mutual funds, head over to the relevant section of the broker’s website.

    Step 5: Make an Investment

    Once you’ve identified an investment that you wish to make, you simply need to enter the amount that you want to inject in pounds and pence. For example, if you want to buy £1,000 worth of Barclays shares, enter £1,000 into the order box and confirm the trade.

    If you invested in income-generating assets – such as dividend-paying shares or bonds, your respective payments will be distributed directly into your brokerage cash account. You can withdraw this out at any given time.

    Step 6: Cashing in Your Share Dealing Account

    Whether or not you can cash your investments in will depend on the asset. For example, stocks and shares can be cashed out at any time during standard market hours. Mutual funds are also fairly liquid, although you might need to meet a minimum redemption term.

    At the other end of the spectrum, you might find it difficult to cash out a bond investment. This is because you are normally required to wait until the bonds mature. The only way around this is if the share dealing account broker has access to the secondary markets.

    How to Choose a Share Dealer Account?

    With hundreds of share dealing accounts now active in the UK market, knowing which broker to sign up with can be challenging. As such, we would suggest asking the following questions prior to taking the plunge.

    ✔️ Is the stockbroker regulated by the FCA?

    ✔️ What investments can you add to your share dealing account?

    ✔️ Can you link your share dealing account to an ISA?

    ✔️ Does the broker charge a variable or flat fee? How much do commissions amount to?

    ✔️ Are there any fees to access international markets like the NYSE or NASDAQ?

    Top 5 Share Dealing Accounts UK – Which Broker is Best?

    Don’t have time to research a broker yourself? Check out our top 5 UK share dealing accounts below.

     

    1. AVATrade – 2 x $200 Forex Welcome Bonuses

    The team at AVATrade are now offering a huge 20% forex bonus of up to $10,000. This means that you will need to deposit $50,000 to get the maximum bonus allocation. Take note, you'll need to deposit a minimum of $100 to get the bonus, and your account needs to be verified before the funds are credited. In terms of withdrawing the bonus out, you'll get $1 for every 0.1 lot that you trade.

    Our Rating

    • 20% welcome bonus of upto $10,000
    • Minimum deposit $100
    • Verify your account before the bonus is credited
    75% of retail investors lose money when trading CFDs with this provider

     

     

    2. Capital.com – Zero Commissions and Ultra-Low Spreads

    Capital.com is an FCA-regulated online broker that offers heaps of financial instruments. All in the form of CFDs - this covers stocks, indices, commodities, and even cryptocurrencies. You will not pay a single penny in commission, and spreads are super-tight. Leverage facilities are also on offer - fully in-line with ESMA limits.

    Once again, this stands at 1:30 on majors and 1:20 on minors and exotics. If you are based outside of Europe or you are deemed to be a professional client, you will get even higher limits. Getting money into Capital.com is also a breeze - as the platform supports debit/credit cards, e-wallets, and bank account transfers. Best of all, you can get started with just 20 £/$.

    Our Rating

    • Zero commissions on all assets
    • Super-tight spreads
    • FCA regulated
    • Does not offer traditional share dealing

    82.61% of retail investors lose money when trading CFDs with this provider

     

    Conclusion

    If you’ve read our guide all of the way through, you should now have a full understanding of what share dealing accounts are, how they work, and what you need to look out for prior to making an investment.

    This includes everything from the types of assets the broker allows you to invest in, whether or not you have access to international markets, and crucially – what fees you will need to pay to trade.

    With so many share dealing accounts now in the market, we have made the research process easy for you by listing our top 5 providers of 2021. Ultimately, just make sure that you have a firm grasp of the broker’s fee structure before taking the plunge.

    Eightcap - Regulated Platform With Tight Spreads

    Our Rating

    • Minimum deposit of just $250
    • 100% commission-free platform with tight spreads
    • Fee-free payments via debit/credit cards and e-wallets
    • Thousands of CFD markets including Forex, Shares, Commodities, and Cryptocurrencies
    Start your journey towards reaching all your financial goals right here.

     

    FAQs

    What is a share dealing account?

    A share dealing account allows you to invest in shares, bonds, mutual funds, ETFs, and other asset classes from the comfort of your home. The account itself is provided by a regulated stockbroker.

    What is the minimum deposit when opening a share dealing account?

    This will vary from account-to-account. With that said, at least one of the brokers listed on this page allow you to get started with just £1.

    What fees do share dealing account brokers charge?

    Share dealing account fees come in a range of shapes and sizes - such as monthly account fees, international market fees, and currency conversion fees. However, the main fee that you need to look out for is the dealing charge. This is charged as a variable or flat fee every time you buy or sell an asset.

    Are share dealing account brokers regulated?

    Yes, share dealing account brokers in the UK are regulated by the FCA.

    What payment methods do share dealing account brokers support?

    You normally get the choice of a debit card or bank transfer. Brokers usually allow you to set up a monthly direct debit if you want to make regular investments, too.

    Do share dealing account brokers allow you to apply leverage?

    No, you can only apply leverage with a CFD broker or financial derivative platform.

    What should I do if I have no experience with share dealing accounts?

    You might be best to consider a mutual fund if you have no prior experience of investing online. The fund will manage your money on your behalf, meaning you have the chance to earn passive income.