The S&P 500 is one of the most highly regarded stock market indexes in the world. It is an index that weighs how well 500 of the top publicly traded firms in the US are doing. In addition, it tells us how healthy the U.S. economy and the world’s stock markets are as a whole.
UK investors can diversify their portfolios by investing in this index, which has historically offered high returns. Many UK investors have questions about how to invest in the S&P 500 from the UK because it is a U.S.-based index. The good news is that it’s not only possible but also rather easy with the financial instruments we have today.
The S&P 500, which is overseen by S&P Dow Jones Indices, is a market-capitalization-weighted index. That means that the performance of the index is more affected by larger companies such as Nvidia or Tesla.
It covers around 80% of the US stock market and includes companies in a wide range of fields, such as technology, healthcare, and finance. Investing in the S&P 500 gives you passive exposure to the whole market, which lowers the risk of putting money on just one company.
Before we talk about the details, let’s think about why the S&P 500 is appealing. In the past, the index has given good long-term gains. It is one of the most reliable global equity indexes, having returned about 10% per year before inflation on average over the last half-century. The index also has built-in diversification because it comprises companies from many different industries, such technology, healthcare, financial services, energy, and consumer goods.
A monthly chart showing the S&P 500 Index on a strong uptrend since 2000. Source: TradingView
Since one cannot invest directly in an index, the most popular and cost-effective way for a UK investor to gain S&P 500 exposure is through the following strategies:
Like individual shares of stock, Exchange-Traded Funds (ETFs) can be bought and sold on stock exchanges. This gives investors the freedom to acquire and sell units at any time during the trading day. UCITS-compliant ETFs (Undertakings for Collective Investment in Transferable Securities) tend to be the best choice for UK investors. These funds are regulated in Europe and made expressly for investors who are not from the US.
2. Index Funds
When it comes to investing, there are pooling vehicles that follow indices like the S&P 500 without being traded on an exchange. These vehicles are called index funds, open-ended investment companies, or unit trusts. You can buy them directly from a fund manager or a platform at a price that is determined once a day after the market closes (the Net Asset Value or NAV). This is different from ETFs.
Examples include the Fidelity Index US Fund and the Vanguard US Equity Index Fund. Although exchange-traded funds (ETFs) generally have lower TERs, OEICs are sometimes available on some platforms for no cost to the investor. That makes them a competitive alternative, especially for those who intend to make consistent, fixed-amount contributions.
Taxes can erode returns, so use tax-efficient wrappers. Holdings over $60,000 could face up to 40% tax on death for non-US citizens, but Irish-domiciled ETFs may avoid this via treaty protections. Consult a tax advisor for personalized advice.
Your broker will ask to fill out a W-8BEN form in order to get the lower withholding tax rate of 15% (or 0% for a SIPP). This is a document from the US Internal Revenue Service (IRS) that proves you are not a US citizen and are therefore qualified for the treaty’s lower tax rate.
Currency risk is quite important because the S&P 500 is based on the US dollar, thus changes in the GBP might make returns bigger or less. A stronger pound, for instance, can lower gains. Hedged ETFs like iShares S&P 500 GBP Hedged (IGUS) help with this. However, they cost morel with 0.10% OCF.
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This post was last modified on Oct 01, 2025, 10:34 BST 10:34