You’ve found the ideal US ETF, but it’s not available in the UK. While it is feasible to register an account with a US broker if you live in the UK, you will be refused access to US-listed ETFs (even if you are a US citizen) due to the regulation’s “extra-judicial reach.”
Can foreigners own US ETFs?
Foreign investors are permitted to purchase mutual funds in the United States. If a foreign investor chooses to execute their acquisition through an American brokerage business, they must first register with the IRS.
Can you buy ETFs in the United Kingdom?
When will I be able to purchase my ETFs? ETFs are purchased and sold during regular market hours because they are shares traded on the stock exchange. These hours are from 8 a.m. to 4.30 p.m. in the United Kingdom. ETF trading is even available from 8 a.m. to 10 p.m. on some trading platforms.
Is it possible to acquire US funds in the United Kingdom?
The American Internal Revenue Service requires a W-8BEN form before an individual can buy US stock (IRS). As a result, the second step in purchasing US stocks in the UK is to complete this form. There is no need to download anything; it may all be done on our web platform. The W-8BEN is used to verify that you are not a US resident. It allows us to process an individual tax benefit on your behalf – a reduction of up to 30% in the amount of US tax you pay on profits from US stocks you acquire.
Can I invest in US exchange-traded funds (ETFs)?
The market capitalization of the five largest US-domiciled ETFs is greater than that of the whole European ETF market. You can keep or sell any US-domiciled ETF you already possess, but you won’t be able to buy more until a PRIIPs compatible KID becomes available.
Vanguard is available to non-US nationals.
Each of the investment products and services mentioned on this website is intended for use by residents of the United States. This website is not intended to be a solicitation or offer for any investment product or service in any jurisdiction where such solicitation or offer would be illegal. International visitors are encouraged to visit Vanguard’s Global Investors site for further information on the goods and services available to them.
In the United Kingdom, how are ETFs taxed?
In the United Kingdom, around 75% of ETFs have either’reporting’ or ‘distributor’ status. Investors prefer that their ETFs be categorized in one of these categories since it means they will pay less tax. When an ETF is classified as one of these, any ETF gains are subject to capital gains tax, which is normally a less expensive option than income tax. Instead of income tax rates that can reach 50%, capital gains tax rates are either 18 percent or 28 percent. (It’s worth noting that this capital gains tax applies not only to ETFs, but also to other traditional investments like funds and stocks.)
It’s important to note that around 25% of ETFs in the UK, as well as the majority of ETFs traded on US or European markets, lack the’reporting’ or ‘distributor’ status. Investment profits can be assessed as income tax if you don’t have this status, which can be quite costly.
HMRC has already demonstrated that it has little tolerance for investors who acquired ETFs that were not designated as’reporting’ or ‘distributor’ by mistake. They will have to pay any taxes they owe.
(Note: The status of’reporting’ is substantially similar to that of ‘distributor.’) When compared to the former ‘distributor’ classification,’reporting’ is simply a newer, updated classification.)
Dividends earned from ETFs or any other traditional investment are normally taxed because they are considered income to the investor. The rate of income tax varies depending on an individual’s income, although it can range from 20% to 50%.
You won’t have to worry about capital gains taxes on ETFs or any of your other investments when you initially start investing.
Individual investors are able to make capital gains of £10,680 on their investments without paying any tax. Only once you earn more than £10,680 do you start paying capital gains tax.
Gains on ETFs held in any of these tax-advantaged vehicles are normally tax-free. These are likely to be the most tax-efficient strategies to hold ETFs whenever possible. However, investors should be aware that if the funds are domiciled in France or the United States, a withholding tax may be imposed.
In summary, what are the most important tax considerations I should make when purchasing an ETF?
The single most significant consideration is whether an ETF is a “reporting” or a “distribution.”
After that, examine the ETF’s domicile, paying special attention to jurisdictions that impose withholding taxes.
Investing in an ETF
ETFs can provide wide market exposure with a single investment. ETFs can be purchased and sold on a variety of sectors, indexes, bonds, commodities, and other topics. ETFs can provide wide market exposure from a single transaction. By opening a share dealing account with us, you can purchase and sell ETFs on sectors, indexes, bonds, commodities, and more.
How do I buy US equities in the United Kingdom?
Yes, all current trading platforms and investment apps will allow you to deposit in one currency and then convert it to another currency, such as US dollars, to purchase foreign stocks. The US dollars can then be converted back into GBP straight through the investing app after the trade is closed. You are, of course, exposed to currency rate risk as a result of this.
Investing in US stocks exposes investors to currency changes, which is both a benefit and a danger. Even if the share price does not go down, if you own a US stock and the US currency depreciates against the pound, your US stock will be worth even less to you. Also keep in mind that when investing in real shares, you’ll have to pay a physical currency conversion fee, and keeping track of and converting currencies can be difficult.
All deals on all markets, including US stocks, are denominated in GBP on an LCG spread betting account, making things simple for the customer.
You could be perplexed. How can I buy equities in the United States from abroad? Keep in mind that, in this day and age, most shareholders will not have a physical copy of their stock certificates. You can own the stocks while the bank or broker has the certificates in their custody, either physically or digitally, and charges you a small quarterly fee (this process is called dematerialisation).
When investing in US stocks, there are two choices to consider. Taking direct ownership of the stocks – or speculating with CFDs while avoiding direct ownership.
One of the most important factors to consider when investing is how much tax will be due on any profits. The risk of double taxation is naturally a concern for British investors in the United States. Fortunately, this isn’t the case.
You would not be compelled to pay US capital gains tax as a so-called ‘non-resident alien,’ i.e. a non-US citizen who does not dwell in the United States; instead, you would pay it in your home country, the United Kingdom. Furthermore, there is no UK capital gains tax on returns if you register a spread betting account (subject to you being a UK resident for tax purposes).
Even though they are not citizens of the United States, Brits will be required to pay dividend tax, just like Americans. But don’t worry, it happens on its own. When a firm pays you a dividend for owning its stock, your UK bank or broker will deduct the appropriate tax and pay you the remainder.
*** Please be aware that LCG does not provide tax advice; taxes are determined by individual circumstances and are subject to change. Please get advice from a tax specialist. Furthermore, because LCG does not provide investment advice, you will need to consult with an independent advisory investment broker to determine whether our products are acceptable or suited for your current investment strategy.
The time difference and Stock Exchange opening/closing hours will be a factor to consider if you are investing in US equities in the UK. Due to the time difference, you will be able to purchase and sell US equities only in the afternoon and evening if you are investing while in the UK time zone (GMT). Why waste time watching TV when you can invest?
From 3:30 p.m. to 10:00 p.m., British Summer Time is in effect. (Begins 14:30 GMT+1 and ends 21:00 GMT+1)
During the winter (November to April), (GMT – Greenwich Mean Time) is used, and during ‘Daylight Saving’ Time, (BST – British Summer Time) is used (May to October)
What is the best way to begin trading? To trade in US stocks from the United Kingdom, follow these simple steps:
Spread betting and CFD trading are high-risk investments that can result in the loss of your money. CFDs are sophisticated instruments that carry a high risk of losing money quickly due to their leverage. Please be aware that when trading CFDs, 69 percent of our retail investor accounts lose money. You should think about whether you understand how CFDs work and whether you can afford to risk losing a lot of money.
London Capital Group Limited (LCG) has prepared the information contained in this message, which is solely for informational reasons. It is not meant to be used for investing, business advice, or as an offer or solicitation to buy or sell any financial instrument. Any comments, news, research, analysis, prices, other information, or links to third-party websites contained in this communication are offered solely as general market commentary and are not intended for commercial purposes. LCG disclaims any and all liability for any loss, damage, or profit that may result directly or indirectly from the use or reliance on such material.
The information in this article is not intended for distribution to, or use by, residents of the European Union, Australia, Belgium, Canada, New Zealand, Singapore, or the United States, and is not intended for distribution to, or use by, anyone in any country or jurisdiction where such distribution or use would be prohibited by local law or regulation.
London Capital Group (LCG) is a limited liability company based in London, England, with the registration number 3218125. The Financial Conduct Authority (FCA) has licensed and regulated LCG under firm reference number 182110. LCG’s registered office is at 80 Cheapside, London EC2V 6EE.