Author Topic: UK investing in US shares  (Read 4054 times)

mykettle

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UK investing in US shares
« on: February 15, 2016, 04:03:21 PM »
I am in the UK and I have got most of my savings invested in ETFs in ISAs. I earn enough to be a higher-rate tax payer, but so far I have been carefully filling in my tax return to prevent becoming one.

I would like to take a punt on a US share, specifically Tesla, and I can't work out how to do it well.

I have looked at Monevator all the best buy tables for UK investment platforms for small time investors etc, but I think I need a US Dollar investment account so that when I get dividends and reinvest, I don't get charged for currency conversion twice. I might want to use a SIPP so I don't get charged the 15% tax on dividends.

My best lead so far is TD Direct, but I can't find anything specific about the dollar account. Does anyone else do this? Do you use a SIPP?


jjface

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Re: UK investing in US shares
« Reply #1 on: February 15, 2016, 06:51:03 PM »
Try interactive brokers if the amount is large enough to avoid inactivity fees. 

Otherwise try a US dollar account with Barclays or Charles Schwab UK.  You should be able to avoid the large currency conversion fees by using a forex exchange place like transferwise to move the money to the dollar account.  TD direct should do a dollar account too. 

www.schwab.co.uk

The barclays account is a regular stockbroker account with 'international trader' added on.  They can add it to ISAs and SIPPS though I think there are some added restrictions on what you can buy.

http://int.tddirectinvesting.com/content/open-account
« Last Edit: February 15, 2016, 07:29:10 PM by jjface »

daverobev

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Re: UK investing in US shares
« Reply #2 on: February 16, 2016, 10:55:51 AM »
TSLA don't pay a divi. Most places should not convert twice for reinvestments of dividends anyway.

If your (unregistered - non ISA/SIPP) portfolio is large enough, Interactive Brokers are excellent - very cheap to trade with them.

Try HSBC maybe? They do some international stuff.

brainfart

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Re: UK investing in US shares
« Reply #3 on: February 17, 2016, 06:19:07 AM »
Whenever I read posts like this they leave me totally confused. The thread starter is located in the UK, with London being one of the major hubs of the financial industry on this planet, yet there is no cheap, easy and commonly known way to buy popular and widely traded US shares in your home currency for a private investor? We are talking about the United Kingdom here, not some remote under-developed country, right?
So the advise is to open an account in a foreign currency abroad, and start trading there.
Goodness gracious.

daverobev

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Re: UK investing in US shares
« Reply #4 on: February 17, 2016, 08:34:12 AM »
Whenever I read posts like this they leave me totally confused. The thread starter is located in the UK, with London being one of the major hubs of the financial industry on this planet, yet there is no cheap, easy and commonly known way to buy popular and widely traded US shares in your home currency for a private investor? We are talking about the United Kingdom here, not some remote under-developed country, right?
So the advise is to open an account in a foreign currency abroad, and start trading there.
Goodness gracious.

Eh, most brokerages can do it no trouble. All of them can sell ETFs which comprise the S&P 500.

IB are an American company, but they work just fine in the UK. Another poster said Schwab *UK*. I suggested HSBC. I know iWeb work.

The thing is, most people don't deal with currency conversion without having a managed account or paying crappy fees. So. It's not "not available", it's "costs more, and there is plenty of stuff available".

Eg, from iWeb:

Our Share Dealing Account gives you...

Just 5 dealing commission per trade on UK and international* trades
No annual/quarterly administration charges
No inactivity charges
Access to 7 world markets

BUT *Foreign currency conversions are required to facilitate the settlement of international transactions. We adjust the exchange rate by 1.5% and keep the difference as our fee when buying and selling international securities. The available exchange rate is based on the exchange rate provided by Digital Look. Indicative exchange rates are provided prior to trading, and the rate applicable to the individual trade is confirmed on the contract note once the trade has been completed.

Which is bullshit. And why I suggested Interactive Brokers, where you basically get spot and it costs ~$2 to exchange GBP-USD.

jjface

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Re: UK investing in US shares
« Reply #5 on: February 17, 2016, 10:54:43 AM »
So the advise is to open an account in a foreign currency abroad, and start trading there.
Goodness gracious.

Nope the advice is to open an account in a foreign currency in the UK!

Most uk brokerages charge excessive forex costs eg Halifax charges 1.25% in addition to whatever poor exchange rate they use..  Holding a US dollar account in the UK and transferring dollars via a 3rd party forex place is cheaper.

Interactive brokers is one of the few exceptions but is more for frequent traders or over $100k balances otherwise they charge extra fees. 

« Last Edit: February 17, 2016, 10:57:33 AM by jjface »

cerat0n1a

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Re: UK investing in US shares
« Reply #6 on: February 17, 2016, 01:37:02 PM »
Even if you ignore the currency conversion charges, it's still slightly painful holding dividend paying US shares directly. You have to fill out the the W8-BEN to get US withholding tax reduced from 30% to 15%, even if you invest through an ISA, and you have to do it every couple of years. If you own them outside an ISA, you also have to fill out the foreign earnings section on the tax return for the dividends.

Of course, if you buy Tesla shares, you won't have to worry about dividends (or capital gains in future :-) )

brainfart

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Re: UK investing in US shares
« Reply #7 on: February 17, 2016, 04:20:40 PM »
> Nope the advice is to open an account in a foreign currency in the UK!

But.... WHY?!?

> *Foreign currency conversions are required to facilitate the settlement of international transactions. We adjust the
> exchange rate by 1.5% and keep the difference as our fee when buying and selling international securities.

> Most uk brokerages charge excessive forex costs eg Halifax charges 1.25% in addition to whatever poor exchange rate
> they use..  Holding a US dollar account in the UK and transferring dollars via a 3rd party forex place is cheaper.

There is no need to make this simple buy order an international transaction, or use dollars to complete it! All he wants is some Tesla shares. Are you guys trying to tell me that you cannot buy Tesla in the UK?

I just checked. I could place an order for Tesla through my online bank/broker through at least 10 different stock exchanges, like Amsterdam, Zurich, Paris, Frankfurt, Milano, New York, and even LONDON and a bunch of virtual trading floors. Now if I was foolish enough to buy in NY or Sydney or Singapore I would have to expect currency exchange fees, since my local currency is the Euro.
But the Tesla shares are traded in Euro on most of the mainland European stock exchanges. And in London they are traded using the British Pound as the currency.

So why not avoid all that hassle and simply buy Tesla in your home country, using your own currency and reduce fees that way?




cerat0n1a

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Re: UK investing in US shares
« Reply #8 on: February 18, 2016, 12:35:56 AM »
So why not avoid all that hassle and simply buy Tesla in your home country, using your own currency and reduce fees that way?

You can buy them through pretty much any online broker in the UK. The question is whether doing so is the cheapest way to do it. If you buy and sell Tesla shares on a Euro exchange, using Euros, how much are the total currency costs on the transaction? Tesla is listed on NASDAQ, doesn't have a dual listing, so who are you buying these shares from and how do they get paid?

Most people investing in the UK will do so through an ISA, which allows you to invest 15k per year free of tax (and importantly, free of any tax related paperwork.) You can't hold foreign currency within an ISA, but you can hold foreign shares.

So, to give an example, if I buy 10k of a share that is listed in the NYSE, the trading fee is 12.50 but I also pay 100 on the currency exchange.

If I buy US shares outside of an ISA, with dollars, I just pay the trading fee and can fund the account with dollars from a low cost currency provider and keep a dollar balance.

brainfart

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Re: UK investing in US shares
« Reply #9 on: February 18, 2016, 06:28:51 AM »
You guys are totally overthinking this. Really.

> You can buy them through pretty much any online broker in the UK. The question is whether doing so is the cheapest
> way to do it.

I bet it is. Additionally, it is the most simple way.

> If you buy and sell Tesla shares on a Euro exchange, using Euros, how much are the total currency costs on the transaction?

Zero point nothing. Trust me, because I do own a few Tesla shares. Bought locally in Euros, exactly like millions of other EU investors do it all the time.
I actually had Apple shares and a bunch of other US businesses in the last millenium. Also bought with local currency. So what was absolutely common over 15 years ago is still totally unknown in the UK? Seriously?
(Unfortunately I sold them, but that's another story.)

> Tesla is listed on NASDAQ, doesn't have a dual listing, so who are you buying these shares from and how do they get paid?

I buy them on one of the stock exchanges, from other market participants. They get paid in Euros, since they are most likely residing in Europe, too.

So you all still claim the Tesla stock is traded in US dollars in London?

mykettle

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Re: UK investing in US shares
« Reply #10 on: February 21, 2016, 04:07:19 PM »
Thanks for the thoughts. I am now as close as I ever will be to buying a Tesla.

No ISA and no SIPP, and I ended up using getstocks.com. $7.50 a trade and 0.3% foreign exchange fee. No minimums.

As a thought, future readers may like more details such as an example of how to buy US shares in Euros rather than just the declaration that it is possible.