Stamp Duty Reserve Tax (SDRT) is a tax on certain electronic purchases of shares and other securities. HMRC normally charges SDRT at 0.5% of the purchase price.
For example: A £10,000 qualifying share purchase would usually create a £50 SDRT charge.
Most online share trades use CREST, the UK’s electronic settlement system. CREST handles settlements between buyers and sellers.
Your broker or investment platform usually collects SDRT automatically, so you do not need to contact HMRC. However, special rules can apply to some depositary receipt schemes and clearance services. These transactions can face a higher 1.5% rate.
When Stamp Duty Reserve Tax Applies
SDRT commonly applies when you buy chargeable shares electronically through CREST. It can also apply when you buy qualifying shares outside of CREST.
The rules focus on agreements to transfer chargeable securities for consideration, which is what you give in return. Usually, the consideration means money. However, HMRC can also use the value of other assets you provide.
If someone gives you shares for nothing, you normally pay no SDRT.
How CREST Works
CREST automatically calculates and collects Stamp Duty Reserve Tax on chargeable trades. It then sends the tax to HMRC.
Therefore, investors using a broker usually have no separate SDRT payment to make. However, you should still check any unusual transactions. This matters especially when you expect an exemption or relief.
For qualifying transactions, your broker should enter the correct Transaction Stamp Status code. This code tells CREST how to treat the transaction.
Off-Market Transactions
An off-market transaction takes place outside CREST. In these cases, nobody automatically deducts Stamp Duty Reserve Tax for you. Therefore, you will need to notify HMRC and pay the tax yourself.
Your notice should include the buyer and seller details, and explain the following:
- The securities
- The quantity
- The consideration
- Any claimed relief
You also need a payment reference so HMRC can match your payment correctly. HMRC accepts electronic payments through methods included Faster Payments, CHAPS and Bacs.
If you use Bacs, allow three working days for the payment to reach HMRC.
Stamp Duty Reserve Tax Exemptions
Several common transactions do not attract SDRT.
For instance:
- You usually pay no SDRT when you receive shares as a genuine gift without giving anything back
- You usually pay no SDRT when you inherit shares under a Last Will and Testament
Certain transfers connected with marriage, civil partnerships, divorce or civil partnership dissolution can also qualify for exemption. Transfer between trustees can also qualify in some circumstances.
Additionally, qualifying securities on recognised growth markets can fall outside SDRT when they meet the relevant conditions.
Stamp Duty Reserve Tax Deadlines
The deadline to pay depends on whether the transaction could have used CREST.
| Scenario | Response |
|---|---|
| If CREST could have handled the trade | Notify HMRC and pay within 14 days of the trade |
| If CREST could not handle the trade | Notify HMRC and pay by the seventh day of the following month |
| If a deadline falls on a weekend or bank holiday | Pay HMRC by the previous working day |
Late payments can lead to interest and penalties.
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This article is for general informational purposes only and does not constitute legal or financial advice. While we aim to keep our content up to date and accurate, UK tax laws and regulations are subject to change. Please speak to an accountant or tax professional for advice tailored to your individual circumstances. Pi Accountancy accepts no responsibility for any issues arising from reliance on the information provided.