What is the cheapest online broker? You can’t avoid the question because if you want to invest yourself you have to buy shares and bonds through an online broker. Your interests when choosing a broker are opposite to the interests of the broker. You should aim for the following:
- Hardly ever trade! Trade as little as possible. Each time you trade you lose money, guaranteed. Don’t unless you have to!
- Trade as cheaply as possible: Who cares whether you bought a share through broker A or broker B? What matters is how much it cost you. Ignore “frequent trader” rates because you win by trading as infrequently as possible.
- Don’t pay for research: Research isn’t very good. We know, we do research. Don’t pay for it! Learn about finance and investing and do your own research.
- Do pay for data: Making investment decisions requires data. For example, if you want to calculate volatility (and you should) you will need daily price data. If you want to calculate dividend yield, dividend growth and dividend cover that requires dividend and price data. Earnings history is also important. So is balance sheet data to see how geared the company is vs its sector peers. Brokers provide this but it’s not usually very high quality. Consider getting a specialist package for data. We like ShareScope, but there are others such as ADVFN (if you can stomach the garish and pushy ads), and Company REFS. If you want to go for the free option Yahoo Finance is surprisingly good.
Now your broker will want exactly the opposite. They want you to pay them high fees, want you to trade as often as possible, they want to sell you their mediocre watered-down research and data. So bear that in mind as you compare broker offerings.
In the UK you will pay taxes and levies, usually on top of the broker trading fee:
- Broker trading fee of around £8 to £13 per trade (buying or selling)
- 0.5% Stamp Duty Reserve Tax on all UK share purchases settled through CREST, rounded up to the nearest 1p and rounded to the nearest £5 if settled off CREST. The UK Government describes the basics of SDRT here.
- Stamp duty on Irish registered stock is 1%
- The Panel of Takeovers and Mergers levy £1 on all UK share transactions above £10,000
You don’t pay SDRT when you sell a stock. Let’s say you buy £12,000 worth of stock you will pay:
- £8 to £12 as a broker fee, less if you trade frequently (don’t!)
- £60 0.5% Stamp Duty Reserve Tax
- £1 levy to the Panel of Takeovers and Mergers
- Total: £69 to £73
If you’re selling £12,000 worth of stock you wouldn’t pay Stamp Duty Reserve Tax so this would only cost £9 to £13.
Online Broker Trading Charges
We’ve constructed this table on February 23, 2017. It may be out of date by the time you read it, but by clicking on the image icon on the right it will take you to the broker website fee page so you can check. You can sort by any column. We don’t benefit financially in any way from these links so this is meant to be a resource to help you, not to generate revenue for us!
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*Average of purchase and selling price
**Minimum price charged per trade