Tax on buying and selling shares

1. Buying shares

When you buy UK shares, you usually pay a tax or duty on the transaction.

This is called Stamp Duty Reserve Tax (SDRT) for shares you buy electronically and Stamp Duty when you fill in a paper stock transfer form.

It’s deducted from what you pay for the shares - this might be different from their current market value.

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, eg an interest in the money from selling them
  • shares in a foreign company that maintains a share register in the UK
  • rights arising from shares, eg rights you have when new shares are issued

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.

When you don’t pay tax

You don’t have to pay tax if you:

  • buy employee shareholder shares up to £50,000
  • 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)

Buying shares electronically

Tax is automatically charged if you buy shares electronically (through the ‘CREST system’). This tax is known as Stamp Duty Reserve Tax (SDRT).

Tax will be automatically charged at 0.5% when you buy shares through a stockbroker, as it’s a paperless transaction.

Using a stock transfer form

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 like you would for paperless or paper transactions.

Help and advice

Contact the Stamp Taxes helpline for help and advice with Stamp Duty Reserve Tax and Stamp Duty.

You can also hire a professional (eg a tax adviser) to help with your tax.

2. Selling shares

You might have to pay Capital Gains Tax on any profit you get from selling shares.

You can calculate gains and losses from selling shares to work out the tax you have to pay.

When you don’t have to pay Capital Gains Tax

You don’t have to pay Capital Gains Tax if you give away shares to your husband, wife or civil partner, so long as the following both apply:

  • you’re not giving away shares you plan to resell
  • you’ve lived together for part of the tax year in which you give away the shares

You can claim Capital Gains Tax relief if you give away your shares to a charity.

Helpsheet 295 explains how you may still be able to apply for tax relief if you don’t fit into these categories.

If the shares have lost some or all of their value during the time you’ve owned them, you might be able to make what’s known as a ‘Negligible Value Claim’ - see helpsheet 286.

You may have to pay a penalty if you have to pay Capital Gains Tax and don’t tell HM Revenue and Customs (HMRC) by 5 October after the end of the tax year.

Shares received through your job

Helpsheet 287 explains the different rules on Capital Gains Tax if you get shares through your job.

You don’t pay Capital Gains Tax as an employee shareholder if the shares were valued up to £50,000 when you received them.

Investments in small companies

You may be able to apply for relief through the Enterprise Investment Scheme or Seed Enterprise Investment Scheme if you’ve invested in small unlisted companies.

Shares in your own business

You may also be able to claim Entrepreneurs’ Relief if you own at least 5% of the shares in a business for a year and you’re a director, partner or employee of the business.

You might be able to make a Negligible Value Claim - see helpsheet 286.

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Source: gov.uk