hi guys, fairly new to this. what stocks are cheaper from a tax / discounts perspective from point of sale? for example, UK stocks are subject to SDRT at 0.5%. so would US stocks be cheaper? or do they have an equivalent tax??? thoughts??? I’m just trying to figure out which stock exchange has most profitable for retail traders…
Not all UK stock has stamp duty. Stock not listed in GBP you will have fx costs and risks (ie you buy at one fx rate, the stock goes up 3% but the fx has moved against you wiping out the profit).
Rather than trying to save 0.5% I would focus on which are the best stocks to buy
While I fully agree with what WakeMeUp has said, I would add that there are some nice stocks on the Alternative Investment Market (AIM) which is stamp duty exempt, I have a few that I feel good about.
However, AIM can be riskier than FTSE as they are generally less established companies so do your research carefully.
Don’t worry too much about fx rates when choosing to buy between US UK EURO stocks.
Do the research, buy good underlying stocks.
Why avoid a US or UK stock just because of the fx rate if that company is solid?
Fx rates are swings and round abouts, if the exchange rate changes after you bought a US stock using pounds you could be better off or worse off.
It depends what your trading behaviour will be. Obviously if you want to buy and sell an hour later for 1% gain, the margins matter.
From the UK, US stocks have a round-trip fx fee of 0.3%, plus you pay UK CGT.
Normal UK stocks have the 0.5% stamp duty, plus you pay CGT.
Note there is a tax free allowance on CGT, currently £6k.
Some UK ETFs are classified specifically so they’re under CGT, the rest would be taxed as income tax. ETFs do not have stamp duty.
Note than when trading ETFs, there will likely be a wide buy/sell spread, which can be much more than 0.5%. You don’t see it on the chart, so buy £1 or £10 and then sell it, to see what prices you get.
Don’t buy anything, until you’ve seen a few videos explaining something about how shares move, and look at the long and short term price changes. There are usually cycles, and they may zigzag bigger than any rising trend. Waiting a few days can save or cost you several percent. Usually, don’t buy on a high!
Much cheaper checking the spread on the exchange. The feed might be 10-15 minutes behind but will still be a good indication. Some ETFs have a narrow spread, others wider.
Also back to cheap stocks - the easiest way I see is Investment Trusts, where they are trading below their value (NAV). They’re not in favour at the moment and could be a buying opportunity for the right pick.
It was a bit of a surprise when I first got a 20% spread…
If I’d known, I wouldn’t have bothered!
This is a stock, UAMY.
What does the x 100 mean? Does the spread depend on the volume?
Sorry to fly off thread.
It’s not far off topic tbh.
Generally the higher the volume, the lower the spread yes. That’s why although prices move throughout the day, it could pay to trade at the most liquid market time of day.
IIRC this is around market open but more so closing.
The x 100 is the quantity demanded/offered at those prices. If you were to buy or sell more than 100 shares at those offered prices, the remainder of your order would be executed against prices further away.
Thanks for confirming that
When it comes to cheaper stocks from a tax perspective, you’re right that UK stocks have the Stamp Duty Reserve Tax (SDRT) at 0.5%. On the other hand, US stocks don’t have an equivalent tax like SDRT. However, you should be aware of the US capital gains tax, which is applied when you sell your stocks at a profit. If you’re looking for more profitable options, prop trading firm can be a solid choice. They often provide leverage and better commission rates, which can boost your gains. Remember to do your research and consider the trading fees, liquidity, and potential risks before making any decisions. Happy trading, and best of luck on your journey in the stock market!
T212 charge you the 0.5% on UK stocks regardless of the price/quantity, on Invest, though gov.uk say it’s only applicable if the transaction in over £1k.
There’s no stamp duty on CFDs.
No it doesn’t. Stamp duty is due on all electronic purchases regardless of value.
Got it, thanks
Stamp Duty is for when you use a Stock Transfer Form. (And it’s over 1k).
There’s no Stamp Duty on electronic purchases, none at all.
That’s the Stamp Duty Reserve Tax (!).
eToro and others do something so you pay neither. (Make them ETPs?)
From what I gather, you’re often buying CFDs on eToro even if it’s non-leveraged which is how they get around stamp duty. Personally, I’d rather pay 0.5% to own the underlying asset.
What’s the advantage?
Fair point, for traders there isn’t a huge difference.
However, I’m a long-term investor so I’d rather hold the asset than a derivative. Exchange-traded securities are more tightly regulated, whereas you can inflate spread etc with CFDs and they come with counterparty risks. As I’m investing for 30 years or more, I also want to be able to transfer assets to another provider.
Does eToro have a fee embedded in the product that’s being traded? Is there a management fee? Is the spread the same as the underlying shares (especially if you have access to DMA for share trading)… There are plenty of legal differences between a cfd product and actually trading shares.