When you buy UK shares, you pay a tax or duty on the transaction.
This is called Stamp Duty Reserve Tax for ‘paperless transactions’. It’s deducted from what you pay for the shares - this might be different from their current market value.
You pay a duty called Stamp Duty for transactions using a stock transfer form.
You pay tax when you buy:
- existing shares in a company incorporated in the UK
- an option to buy shares
- rights arising from shares, eg the rights under a rights issue
- an interest in shares, eg an interest in the money from selling them
- shares in a foreign company that maintains a share register in the UK
You don’t have to pay tax if you:
- are given shares for free
- buy a new issue of shares in a company
- buy units in a unit trust
- invest in an ‘open ended investment company’ (the trust or company pays the tax, so you don’t have to)
- buy employee shareholder shares up to £50,000
It’s not just paying for shares in cash that’s taxable. You pay tax on the value of what you gave in exchange for the shares.
Tax is automatically charged if you buy shares electronically (through the ‘CREST system’). This tax is known as Stamp Duty Reserve Tax.
Tax will be automatically charged at 0.5% when you buy shares through a stockbroker, as it’s a paperless transaction.
You’ll have to pay Stamp Duty if you use a stock transfer form to buy shares and the transaction is over £1,000. A stock transfer form is classified as a paper transaction.
You pay 0.5% duty, which will be rounded up to the nearest £5.
‘Depositary receipt schemes’ or ‘clearance services’
You’ll have to pay tax at 1.5% if you transfer shares into some ‘depositary receipt schemes’ or ‘clearance services’. This is when the shares are held by a third party and can be traded free of Stamp Duty or SDRT. Not all schemes work like this though - with some of them you pay tax in the normal way.
Help and advice
Contact the Stamp Taxes helpline for help and advice with Stamp Duty Reserve Tax and Stamp Duty.
Stamp Taxes helpline
Telephone: 0300 200 3510
Monday to Friday 8:30am to 5pm
Find out about call charges