Tax when you buy shares
When you buy shares, you usually pay a tax or duty of 0.5% on the transaction.
If you buy:
- shares electronically, you’ll pay Stamp Duty Reserve Tax (SDRT)
- shares using a stock transfer form, you’ll pay Stamp Duty if the transaction is over £1000
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, eg 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, eg rights you have when new shares are issued
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)
You don’t 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 the Stamp Taxes helpline for help with SDRT and Stamp Duty.
You can also get professional help (eg a tax adviser) with your tax.
3. Use 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 £1050, 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 £1000, you won’t need to pay anything.
You’ll need to send your stock transfer forms to the Stamp Office no later than 30 days after they’ve been dated and signed.
You’ll also need to pay your Stamp Duty to HM Revenue and Customs (HMRC).
You may get a penalty if you don’t pay on time.