Stamp duty is levied by the Treasury at 0.5% on buying UK shares.
Of the three financial capitals in the world, only London carries such a burdensome tax. The UK also has by far the highest rate among the G7 nations.
Across the pond, American investors pay just 0.0003%. Germany, Italy and Japan don’t charge stamp duty at all.
I am launching a campaign. In September I will set up a petition to abolish stamp duty on buying shares. And I’d like you to join me.
Sentiment towards the stock market is on the wane. We’re currently seeing an exodus away from traditional share trading accounts into tax-free but highly risky spread betting platforms. It has never been more necessary to get rid of this duty.
How much stamp duty costs you
The damage inflicted by stamp duty is scandalous.
On a single transaction worth £5,000, investment would only be hit for £25, but this soon adds up.
Let’s say you make ten investments per year. Each time you put £5,000 into a stock. You pay £25 in stamp duty each time, or £250 a year. An investor who begins buying stocks at age 30 will, if he follows the pattern described, pay £8,750 by the time he’s 65.
And that’s a conservative estimate. According to the official investigation commissioned by the London Stock Exchange, stamp duty can be even more painful. It:
- Cuts contributions to Child Trust Funds by up to £202,
- Shrinks retirees’ occupational pension funds by between £6,400 - £11,500, and
- Hits stakeholder pensions by £7,500 to £10,400;
How can the self-titled financial capital of the world operate such a prohibitive levy on investors in the stock market?
It’s clearly not necessary. All of the countries that operate without it prove that.
Inevitably, it comes down to our government’s greed and lack of vision.
£3 billion trousered by Darling
Alistair Darling’s Treasury took in about £3 billion in 2006 from stamp duty. Some people might say it’s unreasonable to ask them to give up this cash. Particularly when public finances are in such ill health. Some might even say I’m being greedy...
In reality, however, there is nothing greedy about binning stamp duty. And in fact, doing so could even help the economy. A report by Oxera suggests that GDP could rise between 0.25 – 0.78% a year, every year. This could result in a rise in government tax revenues of £4 billion.
It could also give the stock market a shot in the arm.
The "one-off increase in equity valuations" could potentially lift the FTSE markets by 7.2%.
The opportunity is massive.
However, it is not going to happen by itself. We need to take this initiative by the scruff of the neck. As private savers and investors, we are hit the hardest by stamp duty. We need this change the most.
So we need to take action.
Join the fight
This cause has been championed before. But never before has it been so necessary.
Stock markets are in chaos. The value of shares has been rocked by major volatility in the past 12 months. This has hit investors all over the world. But only in the UK is the investor at a disadvantage before they begin. This handicap makes our market less competitive and makes investors do one of three things...
- Not invest at all.
- They invest abroad, or
- They invest in risky tax-free alternatives, like spread betting.
What makes this possible is that we finally have a Chancellor that’s willing to entertain change.
The political fragility of the Labour party has led to the Chancellor bowing to pressures on a number of tax plans.
And, the Conservatives have, rather opportunistically, announced their plans to cut stamp duty on shares. Shadow Chancellor George Osborne says repairing the damage to personal pensions "has got to be a top priority".
"I am particularly keen to look at stamp duty on shares," he adds.
So the stage is set. We have a dire situation, a weak government and an opposition spoiling for a fight.
If we take action now, there’s a chance that this time someone might actually listen.
As of the 1st September, we’re going to be carrying a campaign and a petition. But before we get there, we want to hear from you. I’m asking you to email me and tell me your experience with stamp duty.
How much has stamp duty cost you? Has it forced you abroad? Out of the markets all together?
Send your comments and suggestions to abolishstampduty@f-s-p.co.uk.
Any contributions and suggestions are very welcome. This is a worthy cause that is worth thousands to long-term investors and potentially billions to the economy.
Join the fight...
Best wishes,
Theo Casey,
Investment Director
The Fleet Street Letter P.S. If you enjoyed this article then we encourage you to sign up for The Fleet Street Letter. Get contrarian, cutting-edge analysis for sensible, long-term investments that secure you high growth and healthy dividends.
