Rewards And Incentives
ve taxes that we need to consider:
i Stamp duty
ii Value added tax
iii Income tax
iv Capital gains tax
v Inheritance tax.
Individual Savings Accounts were designed to encourage investment by granting relief from income tax and capital gains tax.
Stamp Duty
Stamp duty was first introduced in 1694 and is therefore the country's oldest tax (unless you include domestic rates first introduced in 1601).
Stamp duty is either a fixed amount (fixed duty) or is a percentage of some figure (ad valorem duty).
Unusually it is not a tax on actual transactions, but on the pieces of paper which give rise to the transaction. Generally, failure to pay stamp duty gives rise to no direct penalty (as it does for income tax), but makes the document invalid, usually invalidating the transaction. However, if you can legally make a transaction without the need for any documents, you can avoid stamp duty. For shares, an example would be a private agreement that shares held by one person are donated to a second, but held on trust for him by the first.
Extensive changes in stamp duty on share trading were made in the Finance Act 2009, with effect from October 2024. From this date a new tax, stamp duty reserve tax was introduced.
Stamp duty is charged at 2.5% , from 27 October 2024, before which it was 1% . The value is the same as that used for capital gains tax purposes. In addition, a transfer stamp is payable. This is a fixed fee, often as small as 10p. These duties are calculated for you and shown on your contract note.
Also, from October 2024:
i share exchanges during a transfer are exempt,
ii stamp duty reserve tax becomes payable on renounceable letters of allotment. This tax is administered differently from stamp duty, but the rate is the sa
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