Savings & Investing

How to Buy Shares UK — Beginner's Step-by-Step Guide

A simple guide to buying shares in the UK for the first time — choosing a platform, placing your first order, understanding costs, and common mistakes to avoid.

By PocketWise · · 6 min read

Savings and investment information is for educational purposes only. The value of investments can go down as well as up. Cash savings up to £85,000 per person per institution are protected by the FSCS.

Buying shares means owning a small piece of a company. If the company grows in value, so does your investment. Here’s how to get started.

What Happens When You Buy a Share?

Concept Explanation
Share A unit of ownership in a company
Share price The current cost to buy one share — changes throughout the trading day
Dividend A payment some companies make to shareholders from their profits
Capital gain The profit you make when you sell a share for more than you paid
Capital loss The loss you make when you sell for less than you paid
Portfolio Your collection of shares and investments
Broker/platform The company that lets you buy and sell shares

Step 1 — Choose a Platform

Platform Commission per trade Platform fee Fractional shares? Best for
Trading 212 Free Free Yes (from £1) Beginners, small amounts
Freetrade Free (basic) Free (basic), £5.99/month (Plus) Yes Beginners, UK/US shares
InvestEngine Free (DIY) Free (DIY) Yes ETFs and passive investing
AJ Bell £5 per trade (or £1.50 for regular) 0.25% (capped at £42/year for shares) No Wide range of investments
Hargreaves Lansdown £11.95 per trade (or £1.50 for regular) 0.45% (capped at £45/year for shares) No Research tools, wide range
Interactive Investor £3.99 per trade £4.99–£11.99/month (flat fee) No Larger portfolios
Vanguard Investor £0 (own funds) 0.15% (capped at £375/year) No Vanguard index funds/ETFs

Which Platform to Choose?

Your situation Best platform type
Complete beginner, small amounts (under £5,000) Commission-free (Trading 212, Freetrade)
Index fund investor Vanguard Investor or InvestEngine
Building a larger portfolio (£10,000+) AJ Bell or Interactive Investor
Want maximum research and tools Hargreaves Lansdown
Only buying ETFs InvestEngine (free)

Step 2 — Open an Account

Step What to do
1 Go to the platform’s website or download their app
2 Choose account type (see below)
3 Provide personal details (name, address, DOB, NI number)
4 Verify identity (photo ID, proof of address)
5 Link your bank account
6 Deposit money

Account Types

Account type Tax treatment Best for
Stocks and Shares ISA All gains and dividends tax-free Most people — use this first
General Investment Account (GIA) Taxable — CGT on gains, dividend tax on dividends Once ISA allowance is used
SIPP (pension) Tax relief on contributions, tax-free growth Long-term retirement saving
Lifetime ISA 25% government bonus, tax-free First home or retirement (18–39)

Always start with a Stocks and Shares ISA — your first £20,000/year of investments should go here for tax-free returns.

Step 3 — Decide What to Buy

Individual Shares vs Funds

Factor Individual shares Funds (index funds/ETFs)
Risk Higher — one company can fail Lower — diversified across many companies
Research needed Lots — you need to understand each company Minimal — the fund does the diversification
Potential return Higher (if you pick well) or lower (if you pick badly) Market average — historically 7%–10% per year for global equities
Time commitment High — need to monitor and rebalance Low — set and forget
Best for Experienced investors with time to research Most people, especially beginners
Fund type What it does Example
Global index fund Tracks thousands of companies worldwide Vanguard FTSE Global All Cap Index Fund
S&P 500 tracker Tracks the 500 largest US companies Vanguard S&P 500 ETF (VUSA)
FTSE 100 tracker Tracks the 100 largest UK companies iShares Core FTSE 100 ETF
FTSE All-World Tracks developed and emerging markets Vanguard FTSE All-World ETF (VWRL)
LifeStrategy fund Multi-asset (shares + bonds) in one fund Vanguard LifeStrategy 80% Equity
Company Sector Why people buy
Shell Energy Dividends, large cap
AstraZeneca Pharmaceuticals Growth + dividends
Unilever Consumer goods Defensive, reliable dividends
Lloyds Banking Banks Low price per share, dividends
Rolls-Royce Aerospace & Defence Growth story
Tesco Retail Defensive, recovery
Legal & General Insurance High dividend yield
Diageo Drinks Defensive, global brands

Remember: Buying individual shares is riskier than buying funds. A single company can lose most of its value; a diversified fund is far less likely to.

Step 4 — Place Your First Order

Term Meaning
Buy You’re purchasing shares
Market order Buy at the current market price — executed immediately
Limit order Buy only if the price drops to your chosen level
Number of shares How many shares you want (or £ amount for fractional shares)
Bid price The price you can sell at
Ask/offer price The price you can buy at
Spread The difference between bid and ask — this is a hidden cost

Placing an Order (Typical Process)

Step Action
1 Search for the company or fund on your platform
2 Click “Buy”
3 Choose order type (market order for beginners)
4 Enter the amount (£ or number of shares)
5 Review the order — check the price and any fees
6 Confirm
7 The shares appear in your account (usually within seconds for market orders)

Step 5 — Understand the Costs

Cost Amount When you pay
Stamp Duty (SDRT) 0.5% When buying UK shares (not funds or ETFs)
Dealing commission £0–£11.95 per trade Per buy or sell order
Platform fee 0%–0.45% per year Monthly or quarterly
Fund fee (OCF/TER) 0.06%–1.5% per year Deducted from the fund automatically
Spread Variable (usually tiny for large companies) Built into the buy/sell price
Foreign exchange fee 0.15%–1.5% When buying non-UK shares (US shares, etc.)

Example: Total Cost of Buying £1,000 of Shares

Cost Commission-free platform Traditional platform
Dealing commission £0 £11.95
Stamp Duty (UK shares) £5 £5
Platform fee (per year) £0 £2.50 (0.25%)
Total cost in year 1 £5 £19.45

Tax on Shares

Tax Inside ISA Outside ISA
Capital Gains Tax None 10% (basic rate) or 20% (higher rate) on gains above £3,000/year
Dividend Tax None 8.75% (basic), 33.75% (higher), 39.35% (additional) on dividends above £500/year
Stamp Duty (0.5%) Still applies on UK share purchases Still applies
Income Tax on interest None Applies to bond income etc.

Using an ISA eliminates almost all tax on investments. Max out your ISA before using a General Investment Account.

Key Principles for Beginners

Principle Why it matters
Invest for 5+ years minimum Short-term volatility can mean losses; long-term investing smooths returns
Diversify Don’t put all your money in one company or sector
Start with funds Index funds give instant diversification
Invest regularly Monthly investing (pound-cost averaging) reduces the impact of bad timing
Don’t panic sell Markets drop — it’s normal. Selling locks in losses.
Keep costs low High fees compound — use low-cost platforms and index funds
Use your ISA allowance Tax-free growth makes a huge difference over decades
Only invest money you don’t need short-term Markets can fall 20%+ in a bad year

Common Mistakes

Mistake Why it’s harmful
Investing money you need within 5 years You may be forced to sell at a loss
Putting everything in one share If it fails, you lose everything
Chasing hot tips or trends By the time you hear about it, the opportunity has usually passed
Checking your portfolio daily Creates anxiety and tempts panic selling
Timing the market Even professionals can’t do it consistently
Ignoring fees A 1% annual fee difference can cost tens of thousands over 30 years
Not using an ISA Paying unnecessary tax on gains and dividends

Sources

  1. FCA — Investing
  2. MoneyHelper — Investing