The government must use its Spring Statement to cut the stamp duty on shares paid by retail investors to help foster a British investment culture and boost financial inclusion, Hargreaves Lansdown has said.
In an impassioned plea, the investment platform argued cutting the tax, which is applied on the purchase of all UK shares, would be a “welcome first step” to boosting retail investor inclusion and would provide a shot in the arm for UK markets.
“It’s clear there are deep wells of extra funding that could be deployed to help provide capital for businesses to grow and help bolster personal finances at the same time,” Susannah Streeter, head of money and markets at Hargreaves Lansdown said.
“A cut to stamp duty on share dealing would help nudge more people into investing. It’s unreasonable for investors buying UK shares to have to pay stamp duty when most overseas share trades are stamp duty free,” she added.
The government currently applies a 0.5 per cent levy that is usually baked into the purchase and sale of all UK shares.
It raised over £3bn for the Treasury in the last tax year, but that number is falling dramatically as investors shun British funds and UK-listed companies in favour of private markets and investment opportunities overseas.
Applying such a steep stamp duty on share transactions makes the UK an outlier among major economies. The US does not apply a transfer tax on shares and even traditionally less investor-friendly markets like France apply a duty of just 0.1 per cent.
Arguing that cutting the tax would boost households’ financial resilience, Streeting said: “6.4m households have no arrears and more than enough savings to cover emergency needs, but no investments, according to data in the HL Savings and Resilience Barometer.
“Many are missing out on a big opportunity to boost their resilience in later life. The tricky part is getting people to take a first step on their investing journey and dip their toe into the market”
Hargreaves Lansdown’s intervention follows a swarm of similar pleas from other City grandees in recent months.
In January, Alastair King used his first speech as Lord Mayor of London to call on ministers to “look again” at the tax.
“It just cannot be logically correct that, as it stands, we do not pay tax on purchases of shares in international vehicle companies such as Tesla, but we are taxed for investing in a British brand like Aston Martin,” he added said.
London Stock Exchange boss Julia Hogget branded the tax “pernicious” in a speech year, while the chief executive of storied FTSE 250 investment giant Jupiter called it “mystifying”.