Monday 02 February 2026 12:01 am
| Updated:
Sunday 01 February 2026 11:40 am
Brits have called for the removal of stamp duty on UK shares in order to incentivise them to allocate capital into the London market.
Three quarters of investors said that the scrapping of stamp duty on UK shares and trusts would prompt them to take more interest and potentially invest more, according to the latest poll from investment platform Interactive Investor.
This comes after newly listed companies on the London index were granted a three year stamp duty holiday in last year’s Autumn Budget.
The move was welcomed by City officials, but there were calls for the Chancellor to go further and remove stamp duty altogether, in order to prevent investors looking overseas.
Global competitors with no stamp duty include the US, which has lured UK investors through its minimal regulation and AI stock offerings.
However, the UK continues to lead as the most popular region to invest in this year, with 37 per cent of investors confirming their intention to focus on the UK.
In contrast, the US appears to be losing traction among Brits, with just 17 per cent saying that they were looking to invest in the US, down from 20 per cent in June.
Investors are also widening their scope to emerging markets, including in Asia which offers tech and AI investment opportunities away from the AI bubble.
Geopolitical tensions remain a threat
Table of Contents
- 1. Geopolitical tensions remain a threat
- 2. Autumn Budget repercussions
- 3. Similarly tagged content:
- 4. Sections
- 5. Categories
- 6. People & Organisations
- 7. Related Topics
- 8. How would scrapping stamp duty affect UK investors?
- 9. Scrapping Stamp Duty Could Boost Investment in UK Stocks
- 10. Understanding the Current Landscape of UK Stock Investment
- 11. The Potential Benefits of abolishing Stamp Duty
- 12. Historical precedents & International Comparisons
- 13. Impact on Different investor Types
- 14. Potential Drawbacks and Considerations
- 15. The Role of ISAs and Other Tax-Advantaged Accounts
- 16. Practical Tips for Investors
- 17. Case Study: the Swedish Experience (1988)
Ongoing geopolitical tensions remained the most significant threat to investor’s portfolios, with 44 per cent expressing concern.
This was up 11 per cent compared to six months ago, while fears of tariffs and potential trade wars were the second largest concern, followed by the state of the UK economy.
These fears led nearly half of investors to maintain their strategy and invest the same amount of capital as last year, with just over a quarter choosing to invest more.
Esmund said: “It’s still very early in the year, so it’ll be interesting to see if investors’ strategies shift should these geopolitical tensions escalate in the coming months.
But so far… retail investors are prepared to hold their nerve despite uncertainty and invest for the long-term.”
Autumn Budget repercussions
Following the Autumn Budget in November, nearly half investors cited the changes to the tax regime as their biggest concern.
The Budget introduced a major shake up to the tax system, including the freeze to income tax threshold, a new council tax surcharge on properties valued over £2m and hiked dividend taxes.
This led over a quarter of investors to express worries over fiscal drag, while 11 per cent noted dividend tax rises.
Meanwhile, changes to the ISA allowance and salary sacrifice were also raised as a concern, however this was just five and four per cent of respondents respectively.
In the wake of the cash ISA slash and dividend overhaul, Esmund noted the importance of utilising tax-free wrappers, such as a stocks and shares ISA, which can “shield our wealth from being eroded by the ongoing individual tax burden.”
How would scrapping stamp duty affect UK investors?
Scrapping Stamp Duty Could Boost Investment in UK Stocks
The long-debated topic of stamp duty on UK stock transactions is gaining traction once more, with increasing calls for its abolition. Currently, a 0.5% stamp duty reserve tax (SDRT) is levied on purchases of UK shares. Removing this tax,proponents argue,could unlock a significant surge in investment,benefiting both individual investors adn the broader UK economy. But what are the potential impacts, and how could this shift reshape the investment landscape?
Understanding the Current Landscape of UK Stock Investment
Before diving into the potential benefits of scrapping stamp duty, it’s crucial to understand the current barriers to entry for UK stock market investors. Beyond the SDRT, factors like perceived complexity, lack of financial literacy, and the availability of alternative investment options all play a role.
* SDRT Impact: The 0.5% tax, while seemingly small, can erode returns, particularly for frequent traders or those making smaller investments.
* Trading Volumes: Compared to markets without similar taxes, UK trading volumes are demonstrably lower, suggesting the tax acts as a deterrent.
* Investor Demographics: A significant portion of UK stock market investment still comes from institutional investors, with individual participation lagging behind other developed nations.
The Potential Benefits of abolishing Stamp Duty
The arguments for removing SDRT are compelling. Here’s a breakdown of the key anticipated benefits:
* Increased Trading Activity: Removing the tax would immediately reduce the cost of buying UK shares, incentivizing more frequent trading and attracting new investors. This increased liquidity could lead to tighter bid-ask spreads and more efficient price discovery.
* Boost to IPO Market: A more attractive investment habitat could encourage more companies to list on the London Stock Exchange, revitalizing the IPO market. This would provide businesses with access to capital for growth and innovation.
* Enhanced Retail Investor Participation: Lower transaction costs would make UK stocks more accessible to retail investors, possibly broadening the shareholder base and fostering a more inclusive investment culture.
* Economic Growth: Increased investment in UK companies could stimulate economic growth,create jobs,and boost productivity.
* Competitiveness with Global markets: Removing SDRT would bring the UK in line with many other major global markets that do not impose similar taxes on share transactions, enhancing London’s competitiveness as a financial center.
Historical precedents & International Comparisons
Looking at other countries provides valuable insight.In 2008, Hong Kong abolished stamp duty on stock transactions, resulting in a considerable increase in trading volumes. Similar effects were observed in Australia when they reduced their stamp duty rates.
* Hong Kong (2008): Following the abolition of stamp duty, Hong Kong saw a 40% increase in average daily trading volume within the first year.
* Australia: Reductions in stamp duty rates have consistently correlated with increases in trading activity and market liquidity.
* Singapore & Canada: These markets, which also have low or no stamp duty on stock transactions, consistently demonstrate higher levels of retail investor participation.
Impact on Different investor Types
The impact of scrapping stamp duty wouldn’t be uniform across all investor types:
* Retail Investors: Would benefit most directly from lower transaction costs, making it easier and more affordable to build a diversified portfolio of UK stocks.
* Day Traders & Frequent Traders: Would see a significant reduction in their overall trading costs, potentially increasing profitability.
* Long-Term Investors: While the impact on long-term buy-and-hold strategies would be less pronounced, the increased liquidity and potential for higher stock prices could still yield positive results.
* Institutional Investors: Could benefit from increased market liquidity and a more efficient price discovery process.
Potential Drawbacks and Considerations
While the benefits appear substantial, it’s importent to acknowledge potential drawbacks:
* Loss of Tax Revenue: The abolition of SDRT would result in a loss of tax revenue for the government, estimated to be around £3.5 billion annually (figures from 2023/24). This revenue would need to be offset through other sources.
* Potential for Increased Volatility: Increased trading activity could potentially lead to higher market volatility, particularly in the short term.
* Risk of Speculation: Lower transaction costs could encourage excessive speculation, potentially leading to asset bubbles.
The Role of ISAs and Other Tax-Advantaged Accounts
The impact of scrapping stamp duty shoudl also be considered in conjunction with existing tax-advantaged investment accounts, such as Individual savings Accounts (isas). ISAs already offer tax-free capital gains and dividend income, making them a popular choice for UK investors. Removing stamp duty would further enhance the attractiveness of UK stocks within ISAs, potentially driving even greater investment.
Practical Tips for Investors
Regardless of whether stamp duty is scrapped,here are some practical tips for UK stock market investors:
- Diversify Your Portfolio: Don’t put all your eggs in one basket. Spread your investments across different sectors, industries, and asset classes.
- Invest for the Long Term: Avoid trying to time the market.Focus on long-term growth and ignore short-term fluctuations.
- do Your Research: Before investing in any stock, thoroughly research the company, its financials, and its industry.
- consider Your Risk Tolerance: Choose investments that align with your risk tolerance and financial goals.
- Utilize Tax-Advantaged accounts: Maximize your ISA allowance to shield your investments from tax.
Case Study: the Swedish Experience (1988)
In 1988, sweden abolished its stamp duty on share transactions. The immediate effect
