It seems George Osborne has learned from at least some of last year's mistakes. Rather than faffing about with taxes on caravans and Cornish pasties, he has come up with something really useful this time around the removal of stamp duty on Aim shares and other growth markets'. He is also consulting on whether these shares should be made eligible for individual savings accounts (Isas).
This is a smart move, but it's a pity it doesn't go further. Stamp duty is a hangover from the days when share certificates had to be physically stamped to show the buyer had paid a tax designed to cover administration costs. Those days are long gone, and now the 0.5% transaction tax is a drag on share trading on British exchanges.
Investment bank CSFB recently commented that the UK is the second most expensive European market to trade shares in once all costs, including this one, are taken into account. So why stop at Aim shares?
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Aim shares also tend to be smaller, riskier companies. We're glad that they are going to be cheaper to trade, but the worry has to be that the removal of stamp duty on these shares and not others, may encourage investors who might otherwise have avoided small caps to buy them for the wrong reasons - a good example of the tax tail wagging the investment dog.
A better move would have been to abolish the tax altogether. Osborne announced his move by claiming that at a time when other parts of Europe are introducing a transaction tax (the so-called Robin Hood transaction tax on financial deals) "here in Britain we are getting rid of one".
Shame he didn't have the guts to go the whole hog but at least his latest move is a step in the right direction. Let's hope he finishes the job soon.
Meanwhile, if you are interested in Aim stocks, sign up for my colleague Tom Bulford's free email The Penny Sleuth.
-
Stamp duty calculator: how much of a UK sold house price is taxed?Our stamp duty calculator shows you how much the tax will cost you, depending on which band the house price you’re paying falls into.
-
Investors return to equity funds – green shoots or end-of-tax-year blip?Equity funds saw net inflows in March for the first time in over three years. What’s driving this behaviour, and which regions are proving most popular?
-
Somero: trading this overlooked bargainFeatures Mechanical-screed maker Somero dominates its niche and is attractively valued. Matthew Partridge picks the best way to trade it.
-
How to find big profits in small companiesCover Story The small- and micro-cap sectors are risky and volatile. But with careful research and patience, investors could make huge gains. Matthew Partridge explains how to find the market’s top tiddlers.
-
The hidden gems on Aim, London's junior marketFeatures Aim, London’s junior market, is risky – but you can find solid stocks at low prices. Scott Longley reports.
-
Is Aim finally coming of age?Features The Aim market of mostly smaller companies has traditionally been seen as a bit of a backwater. Is it time to change that view? Matthew Partridge talks to Paul Latham and Richard Power of fund management company Octopus.
-
Fetch! The Chinese small-cap stocks to buy in the Year of the DogOpinion Each week, a professional investor tells us where she’d put her money. This week: Tiffany Hsiao of Matthews Asia selects three Chinese small-cap stocks with exciting potential.
-
Small and mid-cap stocks with big potential
Opinion Professional investor Guy Anderson of the Mercantile Investment Trust selects three small and medium-sized firms with promising prospects that the market has missed.
-
Get cheap, reliable growth from smaller companiesFeatures One of the most reliable long-term investment trends is the long-term outperformance of smaller companies over blue chips. Max King picks some of the best ways to buy into this growth.
-
Big gains from small caps
Features In an environment of middling inflation and low interest rates, small-cap stocks tend to beat big blue-chips. John Stepek explains why, and how to invest in them.
