Executive summary

As part of wider proposals to simplify and modernize the United Kingdom (UK) tax system, the UK Government announced on 28 April 2025 that it intends to replace the current stamp duty and stamp duty reserve tax (SDRT) regimes with a single, mandatory self-assessed tax on securities from 2027. For securities outside the Certificateless Registry for Electronic Share Transfer (CREST, the settlement system for UK stock markets) the new tax will be reported and paid through an online portal that will provide confirmation of stamping on submission of the return. There should be little impact for capital market transactions, as securities traded within CREST will continue to be reported via CREST.

The announcement follows several previous consultations and a 2017 report by the Office for Tax Simplification. This Alert highlights the Government's proposals and the next steps before the new tax is implemented. There is a further 1.5% stamp duty and SDRT charge that is subject to separate consultation. The 1.5% proposals are not covered by this Alert.

Background

The current stamp taxes on shares (STS) framework includes two different taxes: 0.5% stamp duty on documents of transfer used for transferring stock or marketable securities (including share buybacks and certain transfers of partnership interests) and 0.5% SDRT on agreements to transfer chargeable securities for money or money's worth.

SDRT was introduced in 1986 to ensure that stamp tax would apply to the transfer of dematerialized shares. Although SDRT applies to physical shares, payment of stamp duty will often cancel the SDRT charge. The two taxes are interdependent but different in many ways, including in terms of scope, reliefs, enforceability and compliance. The aim of the new proposed single tax is to simplify and modernize the STS framework and to provide clarity and certainty.

What is proposed?

The Government proposes to introduce a new single tax on securities that will replace stamp duty and SDRT. On the whole, the new tax is not intended to change the scope of STS. It is intended to modernize the tax and incorporate aspects from the existing regimes. It will also incorporate concepts from the stamp duty land tax (SDLT) regime. Key aspects of the proposals include:

• A mandatory single self-assessed tax will apply to securities reported via CREST for dematerialized shares; an online portal for physical shares will issue a unique transaction reference number (UTRN) on submission of a return.
• In most cases, the purchaser will be liable and accountable for the tax.
• Registrars will be able to register changes of ownership on receipt of a UTRN.
• The tax will apply to all UK securities and debt with equity features but not partnership interests (subject to anti-avoidance).
• Tax will be charged on consideration in money or money's worth (expanding the current stamp duty definition to the SDRT definition) with no £1,000 de minimis exception or specific carve outs for the pension and life insurance industry.
• The uncertain and unascertainable consideration provisions will follow similar rules to those for the SDLT, including the ability to apply for deferral of payment (with a backstop of four years, extending to 12 years on application if the contingent consideration will only be known after the four years).
• All statutory relief will be retained (e.g., group relief, reconstruction and acquisition relief, intermediary relief and the growth market exemption).
• The tax charging point will be at substantial performance or completion (and sometimes both).
• The tax due date will be either 14 days (for shares within CREST) or 30 days after the charging point.
• Penalties and interest will follow the SDRT compliance regime with modification.
• Pro-rata in specie contributions and redemptions would be treated equally for both UK and non-UK fund equivalents.

Several areas remain outstanding, such as further simplification of existing relief and the loan capital exemption.

What will change in practice?

Online portal reporting should mean that filing and payment confirmation is nearly instantaneous, allowing share registers to be updated in a timely manner, without the need for declarations of trust to facilitate the process.

The tax will be directly enforceable and self-assessed. CREST transactions will have the new tax reported and collected through the system with reporting deadlines remaining as is.

A single, clear territorial scope should avoid the confusion associated with the current stamp duty regime and whether that could technically capture transfers of non-UK securities.

A single definition of chargeable transactions and instruments should prevent potential double taxation on the same transactions. The removal of the £1,000 de minimis exception will widen the tax base and capture more transactions.

An application to defer payment for contingent, uncertain and unascertainable consideration will allow adjustments to be made for actual earn-out payments, meaning stamp tax paid will reflect actual consideration ultimately paid, but require post-transaction monitoring for reporting triggers.

A single tax for which all stamp duty and SDRT reliefs are available will eliminate the need to structure a transaction to ensure that it falls within the regime with the appropriate relief; for example, there should be no need to draft letters of direction to transfer dematerialized shares intra-group outside of CREST so that stamp duty group relief can be claimed. Supporting documents will need to be retained to support the validity of claims.

What's next?

The Government will, in due course, publish draft legislation, likely subject to consultation before being introduced to Parliament. At that stage, taxpayers should have further detail on the precise scope of the tax and how various aspects of the existing regimes will be addressed. The Government is designing and building the online portal for reporting and payment of the single tax. Although it is not clear when draft legislation will be provided, the Government has confirmed that it is aiming to introduce the tax, legislative framework and portal in 2027.