In 2027, the new securities transfer tax (STT) is set to replace stamp duty reserve tax (SDRT) and stamp duty on transfers of UK shares and securities. Broadly the new tax duplicates the rates and reliefs of stamp duty and SDRT (and hence is not expected to raise any extra revenue), but there are some notable differences. Unlike the taxes it replaces, it will be a self-assessed tax that will be returned electronically.
Background and general application of the new tax
The proposed reform to stamp duty and SDRT has been a long time coming, following on from the Office of Tax Simplification’s report in 2017, the July 2020 call for evidence on the modernisation of stamp duties on shares and the April 2023 consultation on specific proposals for a single new tax to replace stamp duty and SDRT. It was April 2025 when the UK Government announced its intention to replace stamp duty and SDRT on shares with a new modern tax from 2027. However, it was not until L-Day on 13 July 2026 that HMRC published the draft legislation for the introduction of STT and abolition of SDRT and stamp duty. The legislation will be introduced in its final form in Finance Bill 2026-27 with a commencement date which is expected to be at some point in 2027.
As expected, the 0.5 percent rate of tax is unchanged. The tax base, being 'chargeable securities', will fundamentally remain UK shares, debt with equity characteristics and derivative interests in the like. However, as announced during the consultation process, it will exclude non-UK shares (which were previously susceptible to stamp duty and SDRT in certain circumstances), the grant of options and warrants (albeit their transfer will remain taxable), and transfers of interests in partnerships holding UK shares, subject to a targeted anti-avoidance provision.
The current £1,000 threshold for paying stamp duty will not be retained on the basis that this was introduced to remove the administrative burden of stamp duty, which will not be a feature of the new tax. This will result in a payment and reporting threshold of a penny.
The consideration chargeable to the new tax will be money or money’s worth, which reflects the basis on which SDRT was charged but it has potentially broadened the tax payable in certain situations as chargeable consideration for stamp duty (which prevailed over SDRT) was typically limited to cash, stock/securities and debt. The market value rules that exist under stamp duty and SDRT have been replicated under the new tax and are largely unchanged while the complex stamp duty 'wait and see' and contingent consideration rules (that typically applied to completion accounts and earn-out arrangements) have been replaced with a simplified process. Tax is now paid initially on a reasonable estimate and then followed by a true-up payment once the final consideration is known, plus any interest. However, similar to stamp duty land tax (SDLT), there will be an ability to apply to HMRC to defer the tax due on future consideration payable if it remains uncertain for six months. If accepted, this would protect taxpayers against interest on late payment of tax that would otherwise arise in the future.
The taxing point for the new tax will also change. Following the SDRT rules, the new tax will arise when an agreement for transfer of chargeable securities is made, but a distinction will be made between 'electronic transactions' (i.e. transactions made on or reported to electronic systems such as CREST), and those which are not. For ‘electronic transactions’, the filing and payment obligation under the new tax will need to be discharged within 14 days from the date the agreement for transfer of chargeable securities becomes unconditional. For non-electronic transactions, the filing and payment obligations will be postponed to 30 days from the date the agreement is ‘substantially completed’, being when: (i) substantially all of the consideration is paid; (ii) the transferee exercises economic or voting rights in respect of the acquired shares; or (iii) the transferee agrees to sell the chargeable securities or an interest in them.
There is a specific provision that no STT is payable where there is no change in beneficial ownership and the key specific reliefs and exemptions currently available in stamp duty and SDRT are largely unchanged (but see further below).
Further differences from stamp duty and SDRT
Notwithstanding the similarities between the charging and relieving provisions of STT and the taxes it replaces, there are further notable differences:
- The person generally liable for the tax is the ‘buyer’ who is the person that provides the consideration and may not necessarily be the transferee;
- It is unclear whether procuring the repayment of a target’s debt or guaranteeing repayment is chargeable as money or money’s worth consideration;
- Where securities are acquired in satisfaction of debt, the amount of debt chargeable is not capped at the market value of the securities acquired which was a feature of the stamp duty rules;
- Demerger relief does not require there to be a reconstruction;
- Although the conditions for share-exchange relief remain largely the same, the definition of share capital (which included funded debt) under stamp duty has not been replicated and hence, the share capital mirroring test will no longer require the funded debt in the target company to be replicated in the acquiring company;
- There is no specific charge on share repurchases under section 690 of Companies Act 2006 but it is assumed the intention is that STT is chargeable; and
- There is an exemption for a transfer made pursuant to bankruptcy proceedings or a court or creditors’ voluntary winding up.
Reliefs for capital markets
The existing reliefs for capital markets such as those for UK listings, growth market transactions, intermediaries, stock lending and repos, public issues, central counterparties etc. are broadly replicated in the new tax. In many cases the relief must be claimed in a return. For electronic transactions, it is expected that this requirement will be met by the notification made in CREST, so should not result in any significant change to processes for those types of clients.
Similarly, transitional provisions will apply such that approvals already in place for intermediary relief status, recognition of growth markets and elections for clearance services to apply the 0.5 percent charge will be deemed to apply to STT.
1.5 percent 'higher-rate' charge
The draft legislation consolidates the current separate stamp duty and SDRT 1.5 percent regimes for clearance services and depositary receipt arrangements into a single 'higher-rate charge', applying where chargeable securities are transferred to a clearance service provider or depositary receipt issuer or, in the latter case, where securities are later appropriated by the issuer. The existing option for clearance service providers to elect for the main 0.5 percent charge is also preserved.
A key change is that liability is aligned more closely with market practice: the person liable is the 'interested party' (broadly, the first person credited with a book-entry interest or issued depositary receipts) while the clearance service provider or depositary receipt issuer is treated as an accountable person for collection purposes. The existing related exemptions, including those for capital-raising arrangements, listing arrangements, replacement securities and securities already held within clearance service or depositary receipt structures, are carried across into the new regime.
Minor clarificatory points that were the subject of a separate consultation published in April 2025 have also been incorporated into the new regime. For example, clarifying that a deemed market value charge applies where securities are transferred for the benefit of a connected company and the removal of certain provisions with limited application e.g. the bearer instrument charge on debt instruments and the treatment of consideration payments made in instalments.
Transfers relating to funds
The draft legislation looks to reduce uncertainty for fund reconstructions by putting the broad concepts currently derived from case law and HMRC practice onto a statutory footing, with specific exemptions for in-specie redemptions and fund reconstructions. It also attempts to extend equivalent treatment to certain non-UK funds, particularly for redemptions and reconstructions by introducing comparability and equivalence concepts, intended to help level the playing field between UK and similar non-UK vehicles. STT also includes specific exemptions for certain transfers to pension schemes and transfers made in exchange for rights under life insurance policies. This change maintains the current position that no stamp duty is payable because of the limited forms of chargeable consideration for stamp duty purposes.
The legislation does not appear, however, to extend all fund exemptions equally. While in-specie redemptions and fund reconstructions involving non-UK schemes are expressly contemplated, the exemption for transfers into contractual schemes appears limited to UK authorised contractual schemes and reserved investor funds, meaning non-UK contractual vehicles could face additional charges on fund transitions where previously they may have relied on the limited forms of stamp duty consideration or HMRC practice.
A particular nuance of the draft legislation is that it does appear to extend the UK treatment of sub-funds of umbrella schemes as separate collective investment schemes, to non-UK umbrella structures which may bring greater certainty but also less flexibility for cross-border fund transitions.
Compliance and administration
The new tax is expected to continue to be collected automatically in CREST for transactions settled in CREST but otherwise there will be an HMRC portal through which an electronic return is filed by the relevant statutory deadline referred to above. Aside from self-assessing the tax due, the return will also be the document in which the vast majority of exemption and reliefs will need to be claimed. Once a return is filed through the portal, a receipt will be issued which will be required before the transfer can be registered. Therefore, the link to registration is to be maintained in the same way as it was when SDLT replaced stamp duty on land in 2003.
Although the 'self-assessment' system will do away with entry into complex documentation to avoid delays associated with the stamping and adjudication process that has persisted in recent years, the certainty offered by this process will also be gone. Consistent with other taxes, HMRC will now have a 12-month enquiry period to challenge the self-assessment made in a return plus the usual four, six or 20 year time limits to raise discovery assessments and determinations for any perceived loss of tax. The penalties regime for failure to file a return or pay the tax and for inaccuracies in a return will be consistent with other taxes as is currently the case for SDRT.
Transitional rules
STT will apply (and stamp duty and SDRT will be abolished) from the date the enacted Bill comes into force. However, it appears that any transaction that somehow remains chargeable to either SDRT or stamp duty (for example where the agreement becomes unconditional before the commencement date) will escape STT. There are also rules dealing with unstamped documents (relating to shares or pre-2003 land transactions), once stamp duty has been abolished.
Comment
Modernising stamp duty on shares has been long overdue and the changes to administration should make things easier for HMRC and the taxpayer. Removing non-UK shares and most transfers of partnerships from the charge is a welcome change and in general, the new regime does not appear overly burdensome for the taxpayer. The compliance is a substantial improvement on that of stamp duty and very largely taxpayers should not pay more tax in STT than they did previously.
However, there are aspects of the STT which will need clarification in due course, including defining some of the undefined terms and treatment of specific transaction types. There is also the question of how much of this will be addressed in updated legislation and how much will be dealt with through guidance. This is especially the case with regard to the application of group relief which currently relies very heavily on HMRC guidance. There are also aspects that could be reconsidered with a view to reducing the cost of compliance for taxpayers. In particular, while the removal of the £1,000 de-minimis exemption should not materially increase HMRC’s compliance burden, a taxpayer undertaking a non-electronic transaction will incur a significant compliance cost (relative to tax at stake) in paying advisors to prepare and file a return discharging their STT obligations when the tax could be a little as 1p.
Representations on draft provisions
HMRC are inviting representations on the draft provisions to be made by 7 September 2026.
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