Important information - investment values and income from investments can go down as well as up, so you may get back less than you invest.
The US stock market includes many of the world's largest and most well-known companies, spanning sectors such as technology, healthcare, consumer goods and financial services.
For UK investors, investing in US shares can be a way to access these businesses and diversify a portfolio. While many people already have exposure to the US market through funds and exchange-traded funds (ETFs), some choose to invest directly in individual US shares.
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1. The basics of investing in US shares
Investing in US shares is similar to investing in UK companies. To get started, you'll usually need:
- An account that lets you invest and offers access to US markets
- A valid W-8BEN form
Once your account is set up, you can search for eligible US companies, place a deal and hold your investments alongside the rest of your portfolio.
When you invest in a US share, your return will depend on a number of factors. These include the performance of the company, any dividend income it pays and movements in the exchange rate between the pound and the US dollar.
2. How Fidelity offers access to US shares
With Fidelity, eligible US shares are made available through CREST Depository Interests, or CDIs.
Put simply, a CDI is a way for UK investors to buy and hold shares in companies listed overseas, such as in the US, through their UK investment account. This means you can invest and trade eligible US shares through Fidelity, while the underlying company remains listed on an overseas stock market, such as the New York Stock Exchange or Nasdaq.
This essentially means you can hold eligible US shares within your portfolio alongside your other investments - subject to availability and the account rules that apply.
3. The currency risk of US shares
US shares are traded in US dollars, meaning when it comes to buying a US share - as a UK investor - the price is usually converted into British pounds (sterling) at the current exchange rate.
Changes in exchange rates can affect the sterling value of your international investments, so it's worth paying attention to them.
For example, a US share may rise in value in dollar terms, but if the pound strengthens significantly against the dollar during the same period, your return in sterling could be lower than expected. Equally, a weaker pound can increase the value of your US investments when converted back into sterling.
This additional layer of risk means currency movements can either enhance or reduce investment returns, regardless of how the underlying company performs.
4. Costs of buying US shares
When you buy or sell a US share, there are usually two costs to consider:
- Your provider's standard dealing charge (where applicable).
- A foreign exchange (FX) charge when converting between pounds and US dollars.
Before investing, it's worth understanding these charges and how they may affect your overall return.
For further information, please refer to Doing Business with Fidelity
5. US stock market trading hours
US shares are generally traded on the New York Stock Exchange (NYSE) and Nasdaq.
Normal market hours are 9.30am to 4pm Eastern Time, which is typically 2.30pm to 9pm UK time, although this can vary when daylight saving time changes occur.
6. Understanding US dividend tax
If you own US shares and receive dividend payments, the US government may deduct tax before the income reaches your account. This is known as US dividend withholding tax.
The standard withholding tax rate for non-US investors is 30%, which is deducted automatically at source.
However, the UK and US have a tax treaty which lowers the withholding tax for qualifying dividends from US shares by half - from 30% to 15%. That’s where a W-8BEN form comes in.
7. How does a W-8BEN form work?
In order to invest in US shares and benefit from the US Internal Revenue Service (IRS) treaty rate with the UK, you’ll usually need to complete a W-8BEN form with your investment provider.
In most cases, the process is quick and easy to complete and can be done online and often validated immediately. From there the W-8BEN form is normally valid for up to 3 years and expires at the end of the 3rd year on 31st December. For example, if you signed your W-8BEN form in May 2023, this will expire in December 2026 and must be renewed before this date.
8. Completing a W-8BEN form with Fidelity
If you're investing in US shares through Fidelity, you can complete your W-8BEN online.
1. Log in to your account
Access your Fidelity account and navigate to the W-8BEN section. Some information may already be pre-populated using the details held on your account. If you notice any incorrect fields, please first check your account settings.
Review the information carefully and complete any remaining fields before submitting the form. Complete your W-8BEN form.
2. Check your form status
Once submitted, we'll let you know when your form has been validated.
You can also check the status and expiry date of your W-8BEN in the Preference Centre under 'Investing in US shares (W-8BEN)'. Visit your Preference Centre.
3. Start investing in US shares
Once your W-8BEN is valid, you'll be able to invest in eligible US shares through Fidelity.
We’ll contact you a few months before your W-8BEN is due to expire as a reminder to renew. Find US shares.
9. Which Fidelity accounts can hold US shares?
Account eligibility varies between providers. With Fidelity, US shares can currently be held in:
- Stocks and Shares ISA
- Junior ISA
- Investment Account
US shares cannot currently be bought or held within a Fidelity Self-Invested Personal Pension (SIPP).
Other investment providers may offer different account options for investing in US shares.
10. Before you invest
Investing in US shares can provide access to some of the world's largest companies and offer valuable diversification opportunities. However, it's important to understand the additional considerations involved, including currency movements, dealing costs and tax rules.
For investors who don't want to select individual companies, funds and ETFs can offer a simple way to gain exposure to the US market, including broad index-tracking investments that spread risk across many businesses.
Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one ofFidelity’s advisers or an authorised financial adviser of your choice.
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