City bosses call for stamp duty on shares to be scrapped to save UK stock market
Hargreaves Lansdown, IG, AJ Bell, Bestinvest and Interactive Investor - along with business lobby group CBI - are calling on the government to take urgent action to encourage people to invest in the UK stock market
City bosses are calling for stamp duty on shares to be axed to revitalise the ailing UK stock market.
Ahead of the chancellor’s Mansion House speech next week, five of the biggest investment platforms – Hargreaves Lansdown, IG, AJ Bell, Bestinvest and Interactive Investor – have told MoneyWeek that the 0.5% tax penalises investors for backing British businesses and it should be scrapped.
If the government removed the duty, it could boost the London Stock Exchange by encouraging savers to invest, and help Rachel Reeves achieve her aims of growing the UK economy.
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The CBI, a business lobby group, along with chairmen and leaders from more than 30 listed companies, including Anglo American, Shell, HSBC and AstraZeneca, have also called for “bold action” to bolster the London Stock Exchange as a global capital markets hub, which includes abolishing stamp duty on shares.
Richard Wilson, chief executive of Interactive Investor, comments: “If DIY investors are to be the boost to the UK stock market that the chancellor thinks they can be, she also needs to make UK stocks and shares more investable.
“Stamp duty on UK shares and investment trusts is an outdated and damaging tax from a bygone era that serves only to undermine the competitiveness of our stock market.
“Removing stamp duty on UK shares will help encourage retail investors to back the best of British businesses.”
Gina Miller, political activist and founding partner of SCM Direct and MoneyShe, also thinks stamp duty on shares should be abolished. She tells MoneyWeek: “Removing this tax would be a straightforward, pro-growth reform that would help level the playing field for UK equities and encourage both domestic and international investors to allocate more capital to British companies.”
The chancellor is expected to announce plans to cut the cash ISA limit in her Mansion House speech on 15 July, in an effort to shift cash savings into UK shares.
According to the Financial Times, Reeves is set to introduce an annual tax-free allowance for cash ISAs at a lower level than the current £20,000-a-year overall ISA limit. It is understood the final figure is still being discussed by Treasury officials.
However, investment experts argue that axing the 0.5% tax would be a more effective tool to get people investing.
Almost three quarters (72%) of investors believe removing stamp duty on UK shares and trusts would incentivise them to invest more in UK assets, a poll by Interactive Investor of about 1,000 retail investors found.
That compares to only 7% who said they would invest more in the stock market if the government lowered the cash ISA allowance, which is currently £20,000.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, says scrapping stamp duty should make the City more attractive. “It is unreasonable that investors buying UK shares have to pay stamp duty when most overseas share trades are stamp duty free.”
According to Michael Healy, UK managing director at IG, the London stock market, “once the envy of the world, is in a downward spiral”.
As well as abolishing stamp duty, IG thinks the government should go further and scrap the cash ISA too.
Why does the UK stock market need saving?
Concern has been mounting about companies leaving the London Stock Exchange (LSE), or being reluctant to list.
The LSE has seen a wave of companies departing in recent years. The exodus means that last year, 88 companies left the London market or moved their primary listing elsewhere, and only 18 joined. More than 70 have left so far in 2025.
Money transfer company Wise announced plans to move its primary listing from London to the US in June. Flutter Entertainment and Ashtead Group have also chosen to switch their listings to the US.
A lack of IPOs means the UK stock market is shrinking. The LSE saw just 18 IPOs last year according to EY, the lowest number since the accountancy firm started recording the data in 2010.
Streeter says “the bright lights of New York, with its hefty valuations and super-star tech giants, are a big draw” for companies choosing where to list.
According to Healy, the UK stock market is in crisis, and “we need bold action”. He adds: “At the same time, the UK is stuck in a damaging savings-first mindset, with far too few people investing to build wealth for the long term.”
“Remove this outdated tax that unfairly penalises UK investors”
The 0.5% stamp duty tax is paid when investors buy UK shares, investment trusts, and even when buying UK shares in their ISAs and pensions, but the industry argues it is outdated and unfair.
Healy calls stamp duty a “self-inflicted wound”. He adds: “No other major economy taxes equity investment like this”, and says Reeves must “remove this outdated tax that unfairly penalises UK investors”.
Jason Hollands, managing director of Bestinvest by Evelyn Partners, tells MoneyWeek he’s been arguing for the scrapping of stamp duty on UK share trades for some time.
He explains: “It has a much more material impact on the UK equity market than people might assume, because it discourages active share trading, a vital ingredient to improving market liquidity.
“Another pernicious impact is on the visibility of liquidity because stamp duty drives institutional investors to use derivatives like CFDs instead that do not incur stamp duty, so has the effect of reducing transparency and compounding an impression of poor liquidity.”
AJ Bell also supports the removal of stamp duty from UK shares. Tom Selby, the platform’s director of public policy, comments: “Reeves should review the impact of stamp duty on UK shares – a tax which explicitly disincentivises investment in British companies at a time when government policy is aimed at doing precisely the opposite.”
Gina Miller points out that the UK has the lowest domestic equity allocation among major economies – 4% versus Australia’s 37.7% – and says radical action is needed to address this problem.
“We strongly support the growing calls to abolish stamp duty on shares. It is a significant and unnecessary barrier to investment, reducing liquidity and widening share dealing costs, harming both investors and the wider UK economy,” she comments.
According to Streeter, it’s time the UK was “brought more in line with most other G7 countries and see the playing field levelled” by axing the 0.5% tax on shares.
She says the Office for Budget Responsibility is forecasting that the tax take from stamp duty on shares will rise by 2030 to hit £5.1 billion annually, from £4.2 billion currently.
“However, this is still a tiny proportion of the pie compared to income taxes, which account for £310 billion of the Treasury’s revenues.
“If stamp duty on shares is cut, there may be an initial hit to the coffers, but if it encourages more people to dip their toe into the London market, it could help revitalise the UK economy and create an investment culture in the UK and help the economy grow,” notes Streeter.
Removing stamp duty from shares in ISAs and pensions
AJ Bell says that if Reeves did not want to remove stamp duty from all UK shares, a good starting point is to abolish it on shares in ISAs.
“While the multi-billion-pound annual cost of scrapping stamp duty across the board might make the chancellor wince, creating a specific carve-out for ISAs to support her retail investing drive could be achieved at a fraction of this cost – we estimate somewhere in the region of £120 million,” says Selby.
“In government spending terms, that is pretty much a rounding error and would remove a nonsensical barrier to ISA investors buying shares in UK businesses.”
Hollands at Bestinvest recommends that the chancellor start by “exempting stamp duty from trades within ISAs and pensions, as it undermines the ‘tax-free’ promise”.
He notes: “Reeves should also exempt investment trusts, as it puts them at a disadvantage to OEICs in this respect and stamp duty will already have been incurred on share purchases in their portfolios. If the government isn’t prepared to go the whole hog, then she might also consider exempting small and mid-cap stocks, which are typically more domestically focused businesses.”
Other ways to encourage people to invest in UK shares
There are other things the government could do to encourage people to invest in the UK stock market.
One is to give more investors the opportunity to take part in IPOs.
Streeter comments: “Historically, retail investors have been locked out of the bulk of brand-new listings, with the privilege reserved for institutional investors.
“When there is retail participation there is often huge interest. At the Raspberry Pi IPO, HL was significantly over-subscribed. The demand from retail investors to buy into the equities market is there, and regulatory change should support this demand.”
The government seems to be more focused on working out how to shake up the ISA regime to turn savers into investors, and hopefully boost the UK economy.
Interactive Investor boss Wilson cautions that any changes to the cash ISA “will not be effective unless they are combined with other measures that incentivise people to put their money in the markets” - namely, scrapping stamp duty on shares.
IG has launched a Save our Stock Market campaign, which as well as calling for stamp duty to be removed, also wants to see cash ISAs scrapped.
Specifically, it says people should not be able to open new cash ISAs anymore, and that the cash ISA allowance should be brought down to zero from April.
The platform says its analysis shows that UK cash savers have seen around one-seventh of the real returns (after accounting for inflation) of UK investors since cash ISAs were first established by the government in 1999. Despite this, cash ISA subscriptions are rising while stocks and shares ISAs are falling.
According to IG, “cash ISAs are hindering rather than helping them to build wealth”.
Its campaign is also calling for 20% income tax relief on UK shares held in ISAs for at least three years, similar to the Enterprise Investment Scheme, which “should encourage retail investment in UK companies”.
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Ruth is an award-winning financial journalist with more than 15 years' experience of working on national newspapers, websites and specialist magazines.
She is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times.
A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service.
Outside of work, she is a mum to two young children, while also serving as a magistrate and an NHS volunteer.