Yahoo Finance Ask an Expert: how do I buy shares that are listed abroad?
I want to buy shares listed in America and Europe. How do I go about this and how much will I have to pay?
NO, via email
A decade ago, buying foreign shares might have been problematic. Today it is relatively straightforward.
Many investment shops offer overseas share-dealing. They include Hargreaves Lansdown, TD Direct, AJ Bell Youinvest and Interactive Investor. Share-dealing services such as IG also provide access to overseas markets.
The markets available typically include the US, Canada and most European nations. Some services will also offer Australia, Hong Kong, Singapore and more.
How much it will cost to trade depends on the service you choose and the method used to deal with the foreign exchange transaction involved.
There are two approaches to the latter. The first is to fund your account with pounds and conduct the transaction in pounds, with the investment shop handling the currency transaction.
This comes with a conversion fee on top of the dealing charge or commission.
For instance, Hargreaves Lansdown charges an £11.95 dealing fee plus a 1.5pc foreign exchange charge (if the trade is for less than £25,000). If you invested £5,000 in one overseas stock, you would pay £86.95 in total. Similar charges would apply when you sold the investment.
Or you can use an investment shop that lets you hold foreign currency in a dealing account, so you can buy and sell without worrying about currency conversion costs each time. TD Direct offers this option.
To buy the overseas currency to fund the account at your investment shop or broker, you can use a specialist exchange firm such as Transferwise to change your cash at a competitive rate, then pay the foreign currency into your dealing account.
Worth noting is that Interactive Investor and TD Direct will soon merge into one platform under the Interactive brand. However, it is our understanding that TD's international dealing features will be incorporated, although the full details have not been released.
Those who invest via an Isa cannot hold foreign currency in their accounts. so they will have to take the first route and stomach the extra cost of dealing in sterling. Sipps (self-invested personal pensions) do not have such restrictions.
Some investment shops may not offer access to foreign shares within an Isa at all.
There are potential tax implications for overseas shares. Some countries automatically deduct tax from dividends at source, posing the risk that you pay tax twice. In many cases there will be a “double taxation” arrangement between Britain and the other country to prevent or limit this, or you may be able to reclaim extra tax paid.
Special paperwork may be required. For instance, those who want to buy US shares will need to fill in a W-8BEN form, which qualifies the investor to pay a reduced rate of tax on income from their shares.
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