Modernising stamp taxes on shares: What you need to know

The UK Government is pressing ahead with long-anticipated reforms to the stamp taxes regime applicable to share transfers. 

As part of its Spring 2025 Tax Update, and following extensive consultation launched in 2023, HMRC has confirmed its intention to replace the current dual system of stamp duty and stamp duty reserve tax (SDRT) with a unified, digital, self-assessed stamp tax on securities. 

In this article, we outline the key features of the proposed regime, expected to be introduced in 2027, and highlight some practical considerations for taxpayers.

A unified tax for a digital age

The UK currently operates two overlapping stamp tax regimes applicable to share transfers:

• stamp duty, which applies to paper-based transfers of shares, certain debt securities and partnership interests; and
• SDRT, which is charged on agreements to transfer ‘chargeable securities’ such as stocks, shares and certain loan capital (usually via CREST or another electronic platform).

The principal tax charge for both regimes is 0.5% of the consideration paid. 

Although interdependent, stamp duty and SDRT each have their own scope, exemptions and administrative processes, which has long been a source of complexity, administrative inefficiency and uncertainty, making the system a prime candidate for reform. The Government now proposes to simplify the dual system by introducing a single, digital, self-assessed tax on securities, with the aim of improving clarity and certainty, ease of use and administrative efficiency.

Key features of the proposed new regime

The Government’s consultation responses outline the following proposals for the new regime:

• Scope – The new tax is expected to apply to securities in UK-incorporated or UK-listed companies and, subject to further consideration, may extend to those companies with a UK share register. It will apply to stock and non-government bonds with ‘equity-like’ features, while retaining the current ‘loan capital’ exemption to exclude debt-like securities from the regime. Transfers of partnership interests and grants of call options and warrants will generally fall outside the scope of the new tax, subject to anti-avoidance provisions.
• Tax rate & payment deadlines – Subject to confirmation, the main tax rate is expected to remain at 0.5% of the consideration payable for the transfer. Payment of the tax will be due within either 14 days (for transfers carried out in electronic settlement systems, such as CREST) or 30 days (for other, ‘off-market’, sales) of the earliest of substantial performance (being the date when the benefits of the shares, such as voting or dividend rights, are exercisable by the purchaser) and completion of the relevant transaction. The purchaser would be liable for the payment of the tax. A further consultation is planned to consider the 1.5% tax that currently applies to certain transfers of UK securities overseas.
• Online portal – In line with the UK’s general trend toward self-assessment, the new tax will primarily be administered through a new online portal, representing a significant shift from the current system for paper-based transactions. CREST will continue to be used for collecting tax on eligible electronic share transfers.
• Registration of share transfers – Taxpayers will receive a unique transaction reference number (UTRN) immediately upon submitting a return on the portal, rather than after the tax has been paid, to reduce delays in registering share transfers. This would mean that taxpayers would be able to register share transfers on the same day as the return is made, without resorting to complicated workarounds to expedite registration.
• Removal of de minimis threshold – The current £1,000 de minimis threshold for stamping documents will be removed, despite the majority of the responses to the Government Consultation opposing the change. However HMRC intends the online portal to be able to generate key forms (such as stock transfer forms, Companies House form SH03 and certificates of confirmation) with the UTRN automatically included, which may ease the administrative burden.
• Exemptions & reliefs - Key exemptions and reliefs, including group relief, reconstruction and acquisition reliefs, the growth-market exemption, and intermediary relief, will be retained and self-assessed via the portal, without the need for HMRC adjudication.
• Uncertain & unascertainable consideration – The new regime is expected to broadly follow the approach taken in the current Stamp Duty Land Tax legislation towards uncertain and unascertainable consideration. Taxpayers will have the option to apply to defer payment of the tax (where the applicable conditions are satisfied), with an initial deferral period of up to four years, and potential extensions of up to 12 years. This aspect of the Government’s proposal has been widely welcomed as a significant improvement over the current system, where stamp duty is assessed on uncertain and unascertainable consideration using the ‘wait and see’ and contingency principles.  It is however likely to result in more tax being payable in some cases which would previously have escaped stamp duty altogether.
• Compliance & penalties – There will be no statutory clearance process for the new tax; only non-statutory clearance will be available. A new percentage-based penalty regime (similar to other taxes) will apply for late notification, starting at 5% and going up to 100% of the tax due (depending on the taxpayer’s behaviour) - even where reliefs are claimed.

Comment

The Government’s commitment to reforming the UK stamp taxes regime marks a significant and welcome step toward modernising an area of tax law that has long been criticised for its complexity and inefficiency. The proposed shift to a new single, digital, self-assessed tax on securities certainly has the potential to streamline administration and support faster, potentially same-day, registration of share transfers.  

It is noted, however, that the introduction of stamp duty land tax in 2003 significantly increased the amount of additional information which taxpayers were required to provide, much of which appears to be irrelevant to the calculation and administration of the tax: it is likely that the new portal will continue the trend of collecting data for its own sake which will counter some of the benefits of a supposedly streamlined new system.

There are areas where the proposals could be refined. The removal of the £1,000 de minimis, for example, will be frustrating for some, and will bring a number of smaller, off-market transactions within the scope of the new tax. It will be interesting to see whether the additional tax revenue generated by this measure will justify the inevitable administrative and compliance burden for taxpayers, advisers and HMRC.

The proposed penalty regime also warrants close attention. The introduction of a percentage-based penalty for late notification - starting at 5% of the tax due, even where relief is claimed - represents a significant departure from the current capped penalties under the stamp duty regime. This change is likely to increase HMRC scrutiny and could have material implications for high-value transactions, where adherence to filing and payment deadlines will be crucial.