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Tax on buying shares

When you buy UK shares you pay a tax on the transaction. This is called Stamp Duty Reserve Tax (SDRT) for 'paperless transactions' and Stamp Duty for transactions using a stock transfer form.

Stamp Duty Reserve Tax

When you buy shares through a stockbroker, the transaction is usually completed electronically through CREST (the electronic settlement and registration system). This is known as a paperless transaction.

How Stamp Duty Reserve Tax is worked out

You pay Stamp Duty Reserve Tax on paperless transactions for UK shares at a flat rate of 0.5 per cent. But this is based on what you give for the shares (called the ‘consideration’) - not what they're worth.

This means that:

  • if you buy shares for £1,000 you'll pay £5 Stamp Duty Reserve Tax whatever the value of the shares themselves - Stamp Duty Reserve Tax charges are rounded up or down to the nearest penny
  • if you don't pay cash but give something else of value in return for the shares, the Stamp Duty Reserve Tax is based on the value of what you give for them
  • if you're given shares for nothing, you don't have to pay any Stamp Duty Reserve Tax

Share, share options, rights and interests

You pay Stamp Duty Reserve Tax existing shares in a company incorporated in the UK, or in a foreign company that maintains a share register in the UK, and also when you buy:

  • an option to buy shares
  • rights arising from shares, like the rights under a rights issue
  • an interest in shares, like an interest in the money from selling them

If you subscribe for new shares in a company, stamp duty is not payable.

If you buy units in a unit trust, or invest in an 'open ended investment company', the trust or the company pays the Stamp Duty Reserve Tax and they take this into account when setting the price at which they'll sell to you.

  • Use HMRC's Stamp Taxes calculator for stocks and shares

Stamp Duty

If you use a stock transfer form when you buy shares, then it's a paper transaction. You pay Stamp Duty on paper transactions, not Stamp Duty Reserve Tax. Stamp Duty is payable on the same sorts of transaction and at the same 0.5 per cent rate as Stamp Duty Reserve Tax, but the duty is rounded up to the nearest £5 above. However, if you buy shares for any amount of consideration up to £1,000 no stamp duty will be payable. If the consideration is £1,050, the duty will be £10 etc. If you're given shares for nothing, you don't have to pay any Stamp Duty.

Higher rate of SDRT or Stamp Duty for special share arrangements

You'll have to pay SDRT or Stamp Duty at a higher rate of 1.5 per cent if you transfer shares into a 'depositary receipt scheme' or a 'clearance service'. These are special arrangements where the shares are held by a third party and can be traded free of stamp duty or SDRT. (With some clearance services the higher rate isn't charged and stamp duty or SDRT is payable in the normal way when shares are traded.)

How SDRT and Stamp Duty are paid

Most share transactions are paperless transactions, which are completed electronically through CREST. CREST automatically deducts the SDRT and sends it to HM Revenue and Customs (HMRC). Your stock broker will settle up with CREST for the cost of the shares and the SDRT and then bill you for these and the broker's fees.

If you don't buy shares through CREST you pay the Stamp Duty to HMRC yourself.

SDRT is already accounted for in the price you pay for units in Unit Trusts or shares in open-ended investment companies.

Tax on buying foreign shares

You don't have to pay UK Stamp Duty or SDRT if you buy foreign shares. But there may be foreign taxes that you'll have to pay.

Enquiries about Stamp Duty Reserve Tax or Stamp Duty

If you have any questions about Stamp Duty Reserve Tax or Stamp Tax you can phone HMRC Stamp Taxes Helpline on 0845 603 0135 between 8.30 am and 5.00 pm, Monday to Friday - except on bank holidays.

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