If this is the first time you’re learning stamp duty is paid on shares you might be thinking there must be a mistake. After all, isn’t stamp duty the tax that buyers of property pay in the UK?
It’s well known that buyers of property usually have to pay a tax known as stamp duty. What is less well known is that buyers of shares usually need to pay tax, too. Confusingly, this is also called stamp duty.
What is the stamp duty rate?
For the tax year 2021/22, the stamp duty rate is 0.5%. This is one of the smallest taxes around in the UK, but bear in mind that you may need to pay tax on profits as well.
Like with any tax, the government can decide to change the rate for any financial year. Given the tax is so small, it’s unlikely to deter the average retail investor from buying shares.
How do I pay the stamp duty tax?
There’s some good news on this front. Shares are usually purchased via a broker. This same broker will collect the stamp duty tax on your behalf and pass it on to the government
Is there a way to avoid paying the stamp duty tax?
Yes there is. However, this article series (‘things you might not know about the stock market’) is intended to be short and snappy. So instead, the topic of how to avoid paying the stamp duty tax will be covered in another article to keep this article short.
P.S If you enjoy learning about the stock market and want to learn how to trade on the stock market, consider signing up to the 30 Day Trading Programme. The programme is free and you can learn at your own pace.
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