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 SDRT is worked out
You pay SDRT 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 - not what they're worth.
This means that:
- if you buy shares for £1,000 you'll pay £5 SDRT whatever the value of the shares themselves - SDRT 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 SDRT's based on the value of what you give for them
- if you're given shares for nothing, you don't have to pay any SDRT
Use our Stamp Duty calculator for shares
Share, share options, rights and interests
You pay SDRT when you buy shares in a company that's 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 buy units in a unit trust, or invest in an 'open ended investment company', the trust or the company pays the SDRT and they take this into account when setting the price at which they'll sell to you.
Stamp Duty on transfers using paper forms
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 SDRT. Stamp Duty is payable on the same sorts of transaction and at the same 0.5 per cent rate as SDRT, 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.
Use our Stamp Duty calculator for shares
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 us. 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 us 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 SDRT
If you have any questions about SDRT you can phone us on Tel 0845 603 0135 between 8.30 am and 5.00 pm, Monday to Friday - closed on Bank Holidays.
More useful links
Stamp Duty on buying property - from the Directgov website
Read about types of savings and investments on the Directgov website
Getting advice on your savings and investments - information on the Directgov website
