Tax when you buy shares

Printable version

1. Overview

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction.

If you buy:

You’ll have to pay tax at 1.5% if you transfer shares into some ‘depositary receipt schemes’ or ‘clearance services’.

You pay tax on the price you pay for the shares, even if their actual market value is much higher.

Transactions you pay tax on

You pay tax when you buy:

  • existing shares in a company incorporated in the UK
  • an option to buy shares
  • an interest in shares, for example an interest in the money from selling them
  • shares in a foreign company that has a share register in the UK
  • rights arising from shares, for example rights you have when new shares are issued

When you do not pay tax

You do not have to pay tax if you:

  • are given shares for nothing
  • subscribe to a new issue of shares in a company
  • buy shares in an ‘open ended investment company’ (OEIC) from the fund manager
  • buy units in a unit trust from the fund manager

You do not normally have to pay Stamp Duty or SDRT if you buy foreign shares outside the UK. But you may have to pay other taxes.

When you sell the shares

You may need to pay Capital Gains Tax when you sell your shares.

Help and advice

Contact Stamp Duty share enquiries for general information about Stamp Duty on shares.

Contact Stamp Duty Reserve Tax enquiries if you have questions about Stamp Duty on electronic paperless share transactions.

You can also get professional help (for example, from a tax adviser) with your tax.

2. Buying shares electronically

You’ll pay Stamp Duty Reserve Tax (SDRT) if you buy shares electronically through the ‘CREST’ system (a computerised register of shares and shareowners).

The tax is taken automatically when you buy the shares, so you do not need to do anything else about your tax.

SDRT is charged at 0.5% when you buy shares electronically.

If you do not pay cash for your shares but give something else of value to buy them, you pay SDRT based on the value of what you gave.

If you’re given shares for nothing, you do not have to pay any tax.

Buying shares ‘off-market’

You must also pay SDRT on ‘off-market’ transactions. This is when shares are transferred outside CREST.

How to pay

Tax is not deducted automatically when you buy shares off-market.

You’ll need to send HM Revenue and Customs (HMRC) a written notice with details of the transaction.

If you do not pay on time, you’ll be charged interest from the due date until the date you pay. You may also get a penalty.

3. Buying shares using a stock transfer form

You must pay Stamp Duty on your shares if:

  • you buy shares through a stock transfer form
  • the transaction is over £1,000

You pay 0.5% duty, which will be rounded up to the nearest £5.

ExampleIf you buy shares worth £1,050, you’ll pay 0.5% on this amount which is £5.25. You’ll round this up to £10 to pay in Stamp Duty.

For shares under £1,000, you will not need to pay anything.

Get a stock transfer form

You can get a stock transfer form from:

  • a broker
  • a lawyer or an accountant who deals in shares

You can also download a stock transfer form from the internet.

Find out what you need to include in a stock transfer form.

Send the transfer form to HMRC and pay Stamp Duty

You must send a copy of your stock transfer form to the Stamp Office within 30 days of it being signed and dated.

Email an electronic version or a scan of your paper form to stampdutymailbox@hmrc.gov.uk.

If you cannot email your stock transfer form, send a photocopy by post. You must keep the original signed document for your records.

BT - Stamp Duty
HM Revenue and Customs
BX9 2AS
United Kingdom

There is a different address to send a stock transfer form by courier.

You must also pay the Stamp Duty within 30 days of the stock transfer form being signed and dated.

You may get a penalty if you do not pay on time.

4. Special share arrangements

You pay Stamp Duty Reserve Tax (SDRT) or Stamp Duty at 1.5% if you transfer shares into some ‘depositary receipt schemes’ or ‘clearance services’.

This is when the shares are transferred to a service operated by a third party (for example, a bank). The shares can then be traded free of Stamp Duty or SDRT.

Not all of these schemes work like this. Sometimes the higher rate is not charged and you pay Stamp Duty or SDRT in the normal way. Check the details of your scheme with your stockbroker.