Home > Stamp Duty > Stamp Duty on Shares

Stamp Duty on Shares

By: J.A.J Aaronson - Updated: 27 May 2015 | comments*Discuss
 
Stamp Duty Shares Reserve Tax Exchequer

Many inexperienced investors looking for a way to minimise their tax liabilities look to share trading as a way of generating tax-free income. There are two kinds of Stamp Duty which might be payable on share transactions, each of which is applicable in different circumstances.

Stamp Duty Reserve Tax

The first of these duties, Stamp Duty Reserve Tax (SDRT), is becoming more frequently levied as a result of the increasing proportion of trading which takes place through online brokerages. Similarly, many ’real world’ brokers use the CREST system, which also results in a paperless transaction. Currently, SDRT is set at a flat rate of 0.5%.

However, the amount that you pay is not relative to the value of the shares but is calculated as a proportion of what you paid for them. For example, if you paid someone £100 for some shares, you would be required to pay 50p in SDRT, even if the shares were actually worth £500. It should also be noted that you will be required to pay SDRT if you exchange goods or property for shares. In these cases, the amount payable will be calculated as 0.5% of the value of whatever you have exchanged.

As well as simple share transactions, SDRT is levied on the stock options or share interests. If you are buying units in a unit trust, SDRT will also apply, but this will be paid by the trust company and so will probably be factored into the price that you pay.

Stamp Duty

For transactions which use a stock transfer form, stamp duty will be levied. This is applicable in fewer cases than in the past, again as a result of the increase in online trading, but it is still an important factor to understand. Stamp Duty is, in fact, very similar to SDRT; it is payable at the same rate (0.5%), but any payments must be rounded to the next highest £5. For example, if you were buying the same £100 worth of shares as in the previous example, your tax bill would be £5 rather than 50p.

There are a few incidental factors which apply to both Stamp Duty and SDRT. As both are calculated with regard to the actual price paid for the shares, if you are given the shares for nothing then you will be required to pay no tax. Paying your tax bill on shares is very simple. Indeed, if you use the CREST system for trading (which is the case for the majority of transactions), your SDRT will be deducted and sent to HM Revenues & Customs (HMRC) without the need for any further action on your part. If you don’t use CREST, however, you will need to pay the duties to HMRC yourself. This can be done on the HMRC website, where you will also find a simple Stamp Duty calculator.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
if the shares in a UK company are transferred by the shareholder to an overseas based new company, is Stamp Duty payable?
Asif - 27-May-15 @ 5:14 PM
Share Your Story, Join the Discussion or Seek Advice...
Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • Stig
    Re: What is My Tax Code?
    I recently got moved on to a k2600 tax code. My earnings have increased and I now get a fully fuelled car. My earnings prior to this were…
    19 June 2020
  • Legend
    Re: Should I be Paid Mileage Allowance?
    Hi my company are not paying me mileage I'm doing 84 miles a day.They provide me with a works van but can I still claim…
    3 June 2020
  • Caramel
    Re: How Will My Second Job Be Taxed?
    I currently have a full time job and wonder if I get a second job, is it worth it? If earning under 40k (doing both jobs and…
    30 May 2020
  • Dee
    Re: How Will My Second Job Be Taxed?
    I'm currently working full-time, as from next week I will be going part-time, and at the same time starting a new part-time…
    6 May 2020
  • Kel
    Re: How Will My Second Job Be Taxed?
    Hi I have been offered two jobs and want to work out if I accept what would I be taxed or what will I take home after tax and…
    20 April 2020
  • Ness
    Re: Should I be Paid Mileage Allowance?
    I have submitted my mileage allowance form to HMRC and have had notification that I am owed £**** for miles over 10,000.…
    17 April 2020
  • Amanda
    Re: What is My Tax Code?
    Hi I am getting a second job and I just worked it out with both wages I will still be under my personal allowance at 12500 so will I be taxed…
    4 February 2020
  • Pat
    Re: Payment of Pensions
    Who do I contact to change pension payments to weekly from monthly and is it easy to do regards Pat
    29 January 2020
  • Leelee
    Re: How Will My Second Job Be Taxed?
    I worked 48 hours a wk but hey paid for 44 hours a wk iv been offered a second job but only on bank would I have to pay tax…
    29 November 2019
  • Molly
    Re: Should I be Paid Mileage Allowance?
    Hi I have been changed from office based to home based by my company. I have been told I cant claim the first 30 miles of…
    20 November 2019