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The London stock exchanges have been an engine for growth and innovation for 250 years.
London has been the world’s most important financial center for much of that time. However, now it is waning.
We are burdening the stock exchange with an end to its existence. We tax every purchase in the main London market at 0.5 percent (a tax also known as the stamp duty reserve tax – SDRT).
“Not much,” you might say. Yet it is 2.5 times higher than what EU countries charge. New York – our main competitor – charges nothing.
We must abolish stamp duty on shares, says Interactive Investor boss Richard Wilson
But it’s just a rich people problem, right? Wrong. It’s everyone’s problem.
Why? Markets live on flow, or in other words: on ‘liquidity’. If you tax one market and not the other, the power goes to the markets without tax.
When this happens, the ‘buy’ and ‘sell’ prices become further apart (known as the spread), reducing the value of the shares compared to the unloaded markets, speeding up the process. Naturally, the more agile and dynamic companies will be the first to take action.
The result? Step by step, the market is declining and with it employment, talent, innovation and growth. Actually all quite clear.
As CEO of Britain’s second largest investment platform, I can’t have this conversation without also outlining the damaging impact this tax has on end investors.
Ultimately, it creates an unnecessary barrier to investing and worsens short- and long-term results for the end investor.
Why is it that stamp duty on UK shares has remained unchanged for decades, while other investment costs have fallen dramatically? Why are we punishing investors for investing in UK shares, especially at a time when we want to encourage more of them to ‘support Britain’? It just doesn’t make sense.
This tax adds significantly to the cost of investing for private investors. To illustrate, in 2023 the average amount a customer paid in stamp duty on UK shares was £223, and a further £131 on UK trusts.
The total stamp duty tax paid by our customers was a whopping £27.5 million. These costs are increasing, both in the here and now, but also, crucially, in the future.
Fees are hugely important when it comes to investing because they increase over time – a stamp duty paid to the government represents a lost investment return for years to come.
It means British investors are paying too much to support Britain, and it makes it harder for them to achieve their financial goals. A lose-lose. That is obviously not what we want.
We need the government to recognize how important this issue is, not only for the health of our markets, but also for our investor nation.
The government says it cannot afford to stop the tax, to ‘stop the stamp’. However, the harsh reality is that we cannot afford not to do this!
If we act now, I believe this will quickly pay off in jobs and growth. If we don’t, we will continue to see the best companies and talent leave.
For now, don’t be surprised if you read that the British stock market ‘looks cheap’, or that another technology company is going public in New York, or that Britain is overweight ‘old’ sectors.
We need to see an end to this corrosive tax and for the London market to regain its position and support Britain’s growth as the best place to do business.