Best Stock Trading Apps UK

How to decide which stock trading app is the best for you

For example, if you’re still new to stock trading and wish to advance your knowledge of investing while you trade, it may be worth finding the best trading app that offers educational materials, or advanced trading tools designed to take some of the complexity out of trading and help you develop your own trading strategies.

Similarly, some stock trading apps offer access to a free demo account that lets you practise making trades with virtual money. This could be a good choice if you aren’t yet confident making your own investment decisions, and are concerned about putting your money in the market.

You should also keep an eye out for trading costs when choosing the best trading apps. Some brokers may charge a percentage-based fee or commission on every trade, while others may charge a fixed fee.

If you’re planning on trading large volumes of shares, it may be wise to choose a stock trading app with commission-free trading or fixed fees so these costs don’t eat into your potential profits.

Also, non-trading costs, such as platform fees or withdrawal fees, will vary between different brokers, so it’s worth taking these into consideration when choosing the best trading apps.

What is stock trading?

A company usually issues stocks in an attempt to raise money to fund any planned projects, or simply to operate the business.

Trading takes place on the stock market, and there are many different markets you can trade on, such as the London Stock Exchange (LSE) or the New York Stock Exchange (NYSE).

Depending on the company, stocks tend to be highly liquid. However, even though they can be bought and sold relatively quickly, they are generally seen as long-term investments . This is because you typically have a greater chance of positive returns the longer you hold your stock – sometimes as long as 10 or 15 years.

The most common way to generate returns through stock trading is speculation. This is when you buy a stock for a certain price, wait for it to appreciate in value, and then sell it again for a profit.

Despite this, there is another way to generate returns from stock trading: dividend payments.

What are dividends?

A company’s dividend yield will depend on its general performance – if a business is performing well, it might distribute the profits in the form of dividends. That said, performance doesn’t automatically mean a company’s dividend yield will increase – the rate is determined by the company’s board of directors.

Dividend yields are typically expressed as a percentage of a company’s share price. For instance, if you purchased one share in Apple for $200, and its dividend yield was 2.5%, you would receive annual dividend payments of $5.

Dividends are often ideal for income investors. Rather than closely monitoring your investments and waiting for them to appreciate in value, you can instead invest in companies that pay dividends and rely on the payments over a longer period of time.

It’s important to remember that not all companies offer dividend payments; some will instead retain profits and reinvest them into the business.

Investing for growth vs investing for income

The two methods of investing described above are commonly referred to as investing for income, and investing for growth.

If you are targeting a regular income that you can either spend in your day-to-day life, or reinvest, then investing for an income might better suit you. Income stocks tend to be companies that are relatively stable and offer high dividend payments.

It’s worth noting that, while income stocks are typically more stable, they usually have lower growth potential.

As such, you should keep an eye out for companies that have high dividend yields, such as the “Dividend Aristocrats”, which are companies that have increased their dividend yield for at least 25 consecutive years.

Meanwhile, investing for growth involves purchasing stocks in companies that have the potential to increase in value. While they may not offer regular payments in the form of dividends, this growth potential could result in your investment rising in value significantly.

Growth stocks are typically companies that seem to be growing at a faster rate than the general market, and usually use the majority of their revenue to fund further expansion.

They tend to be newer companies with exciting and innovative products that are expected to drive growth in the future. However, since these companies are often less established, they typically come with more risk of losing value on your investment.

How are your investments taxed in the UK?

If you’ve invested through an ISA, you’ll typically be protected from Income Tax, Capital Gains Tax (CGT), and Dividend Tax. This is because an ISA acts as a “tax wrapper” that shields your investments.

If you aren’t holding your investments in an ISA, you will typically be required to pay CGT if you realise a profit from their sale. As of the 2022/23 tax year, CGT rates are:

• 10% (or 18% on gains from the sale of property that isn’t your main residence) for basic-rate taxpayers
• 20% (or 28% on gains from the sale of property that isn’t your main residence) for higher- and additional-rate taxpayers.

You are entitled to earn gains from the sale of your investments up to a certain value before you’re required to pay CGT. This is called the “annual exempt amount”, and as of the 2022/23 tax year, stands at £12,300.

You should bear in mind that the CGT annual exempt amount will drop to £6,000 in the 2023/24 tax year, then again to £3,000 in 2024/25.

You’ll also pay tax on any dividends you earn through your non-ISA stocks. As of the 2022/23 tax year, Dividend Tax rates stand at:

• 8.75% for basic-rate taxpayers
• 33.75% for higher-rate taxpayers
• 39.35% for additional-rate taxpayers.

Much like the CGT annual exempt amount, you can also earn a certain amount of money from dividends before you’re subject to tax. This is called the Dividend Allowance, and as of the 2022/23 tax year, stands at £2,000.

Following the chancellor’s autumn statement, this allowance will drop to £1,000 in the 2023/24 tax year, then further to £500 in 2024/25.

The different ways you can invest in stocks

Direct investments

Direct investing is perhaps the most common way to trade stocks, in which you simply buy stocks directly from one of the many stock exchanges via a broker. You can then either hold onto your investment until it rises in value, or rely on its dividend payments if there are any.

Funds

Funds are a form of pooled investment that reinvest your capital into a selection of financial instruments.

They are typically overseen by fund managers, who tend to be experienced investors. These fund managers will typically aim to diversify the fund’s investments in order to reduce risk by investing in a range of different securities, such as:

• Stocks and shares
• Commodities
• Foreign currency

This means that, by investing in a fund, you’re gaining instant exposure to many stocks from a single investment.

The value of a fund is based on the performance of its constituent investments. If the fund’s investments perform well, the value of the fund – and so your units in it – will rise.

This allows you to purchase a stake in a fund and then sell it for a profit when the fund’s value rises, or hold onto it and rely on regular dividend payments.

There are several different types of fund available, including:

• Exchange-traded funds (ETFs)
• Mutual funds
• Index-linked funds

Funds can either be passive or active. The investments held within active funds are regularly examined and monitored, and managers aim to outperform financial markets.

Meanwhile, passive funds take an “invest and hold” approach, and aim to match pace with an underlying index or benchmark.

Derivatives

You can also trade stocks in the form of derivatives. This is essentially when you “bet” on the performance of a particular security.

One of the most popular ways to trade derivatives is through spread betting. This is when you “stake” a certain amount of money for every point a company’s value rises or falls. You can take a long position, which predicts the value of a company will rise, or a short position, which predicts it will fall.

For example, say you staked £100 for every positive point of movement for Apple’s share price. If Apple’s share price increased by two points, you would earn £200 from your spread bet.

Of course, if Apple’s share price fell by two points in the above example, you would instead lose £200.

Another popular method of derivative trading is with “contracts for difference”, or CFDs. Trading CFDs is similar to spread betting, except that you will instead receive the difference in price from when you first opened your position to the close when you trade CFDs.

It’s vital to remember that trading CFDs and spread betting are both fairly complex. In fact, more than half of retail investor accounts lose money when trading CFDs. Make sure you properly understand the risks involved with trading spread bets and CFDs before you try your hand at it.

The different types of investment accounts

Stocks and Shares ISA

A Stocks and Shares ISA is a type of investment account that allows you to build a tax-efficient portfolio.

As well as stocks and shares, you can invest in a wide variety of different securities in a S&S ISA. This includes:

• Bonds
• Unit and investment trusts
• Exchange-traded funds (ETFs)
• Index funds

Crucially, your investments in a Stocks and Shares ISA are typically protected from Income Tax, CGT, and Dividend Tax.

It’s important to remember that you are limited to the amount of money you can deposit in your ISA each year. As of the 2022/23 tax year, this ISA Allowance stands at £20,000.

This £20,000 allowance covers all types of ISA, too. For example, you could deposit £10,000 into your Stocks and Shares ISA, £4,000 into your Lifetime ISA, and £6,000 into your Cash ISA, meaning you would have used your entire ISA Allowance.

General Investment Account (GIA)

A General Investment Account (GIA) allows you to build a portfolio of investments with no deposit limit.

However, unlike ISAs, any investments made in a GIA will typically be subject to CGT if you realise profits exceeding the CGT annual exempt amount.

You may also face Dividend Tax if you earn money from dividends above the Dividend Allowance.

A GIA could be a good choice if you’ve used up your entire ISA Allowance and still want to make investments.

Which company is best to invest in?

For instance, if your investment goals are to generate returns through growth, it may be worth investing in a newer company that reinvests its revenue to target rapid growth.

Meanwhile, if you’d rather invest for an income, you may want to keep an eye out for more stable companies with higher dividend yields.

How to decide which investment would best suit your portfolio

To find potential companies to invest in, it may be worth staying up to date with industry news. This way, you could be better placed to predict a company’s performance based on its actions.

There are also many stock tips and suggestions available that can give you an idea of some companies that are worth watching, such as our weekly share tip guides.

5 steps to start stock trading today

1. Decide which trading app best suits you and open an account

First, you need to decide which investment app best suits your needs by comparing the different features on offer.

For instance, if you’re planning on trading large volumes of shares, the best trading app may be one that has flat fees rather than percentage-based ones. This way, any potential profits won’t be reduced by excessive trading fees.

Similarly, if you’re still new to investing, it may be worth choosing a trading platform that has educational materials you can use to improve your trading skills.

2. Decide which company you wish to invest in, and how

When you’ve opened an account on your desired trading app, the next step is deciding which company you want to invest in.

You should ideally figure out your goals for investing, and then purchase a stake or trade on that company accordingly. For instance, if you’re investing for growth, it may be worth investing in a newer company that is actively rising in value. Or, if you’re investing for income, it may be wise to invest in a stable company with higher dividend yields.

You should also figure out how you want to invest in that company at this stage. If you’re more risk-averse, it may be prudent to invest in a company directly or through a fund.

Equally, if you’re feeling confident, you could always try trading CFDs or spread betting. However, you should remember that derivative trading is complex, and more than half of retail investor accounts lose money when trading CFDs.

3. Deposit money into your investment account

Now that you know which company you’re investing in and how you plan on doing so, the next step is depositing money into your trading account.

Find your chosen trading platform’s “deposit” option and decide how much money you want to hold in your account.

It may be worth only depositing the amount of money you intend to invest. This is because you’re unlikely to earn interest on any uninvested money held within your trading account, so its value could be eroded in real terms due to inflation.

4. Purchase your desired stocks

Search for the company you wish to invest in, decide how many shares, units, or contracts you wish to purchase, then make the trade.

5. Monitor your investment

Even though you’ve now invested in or are trading on a company, the hard work doesn’t stop here – you need to monitor your investments closely.

This way, you can sell when the price rises and you earn adequate profits, or if the value falls and you wish to cut your losses.

It may be worth setting up price alerts that notify you when a company’s share value reaches a certain price. This means you won’t need to constantly worry about your investments’ performance, giving you the peace of mind that you’ll be alerted should the value rise or fall significantly.

The benefits and downsides of stock trading

The pros of stock trading

• Potential for gains on your investment

Perhaps the best thing about stock trading is that your wealth can grow if your investments perform well, or if you speculate correctly when trading derivatives.

• It could help you stay ahead of inflation

At the time of writing, the rates on offer from savings accounts are relatively uncompetitive. If you hold your money in a savings account, and its interest rate is lower than the rate of inflation, then your wealth could lose value in real terms.

Meanwhile, investing has historically yielded returns above the average savings account interest rate.

For instance, Moneyfacts reports that, as of 22 February 2023, the best interest rate available on an easy-access savings account is 3.15%. Meanwhile, Google Finance reports that the FTSE 100 saw year-to-date returns of 4.64%, as of 22 February 2023.

• Stock trading tends to be easy and accessible

Since the inception of trading accounts that can be accessed from your home computer or phone, stock trading has never been easier.

Once you’ve set up a trading account, you can easily purchase stocks in a matter of minutes from the comfort of your own home or even on the move using trading apps.

The cons of stock trading

• All investments come with risk

When you invest, there’s always the chance you could lose money. If a company performs poorly and its stock price drops, so will the value of your investments.

There is no such thing as an investment with “guaranteed returns”, and it’s often tricky to predict exactly how markets will move, so investing always comes with more risk than holding your money in a savings account.

• It can be stressful to monitor your investments

Investing can be quite stressful, as you may feel the need to constantly check the performance of your investment.

To keep on top of the performance of your investments, you’ll typically need to stay current with financial news and follow any developments in the sector, which can be difficult and time-consuming.

Best Stock Trading Apps in the UK FAQs

Please note:

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

CFDs are complex instruments and more than half of retail investor accounts lose money when trading CFDs. Please make sure that you know these risks before you start trading and that you’re aware there’s a high chance of losing money rapidly on your investment.

More on trading