Stamp duty on shares is 'a tax on growth', new CPS modelling shows

  • First full analysis since financial crisis shows scrapping stamp duty on shares would result in significant uplift to pensions, savings and investment, at little or no overall cost to the taxpayer
  • Abolition of the tax would increase long-run GDP by 0.2% – 0.7%, increase business investment by FTSE firms by between £2.8bn and £6.8bn, and leave the average DC pension pot more than £6,000 larger
  • No other major financial centre imposes a tax on transactions at this level, or in many cases at all
  • Leading City organisations back the CPS’s call for the Chancellor to act

In recent months, there has been an intense focus on the competitiveness of the City of London. The Government has unveiled a suite of reforms intended to bolster financial services, and unleash more capital and investment. Labour, too, have promised to ‘unashamedly champion the financial services sector as one of the UK’s greatest assets’.

Yet neither party has addressed the fact that the UK puts itself at a major competitive disadvantage by imposing a 0.5% transaction tax on a wide range of share purchases, in the form of stamp duty on shares. This is in contrast to our major international rivals who do not impose such a tax.

Independent modelling by the Oxera consultancy for the Centre for Policy Studies – the first full analysis of the impact of the tax since the financial crisis – shows that abolishing stamp duty on shares could be expected to lead to a permanent increase in GDP of between 0.2% and 0.7% in the long run, alongside an increase in the annual business investment of FTSE All Share index companies of up to £6.8 billion. It would also increase the size of a representative DC pension fund by the equivalent of £6,051.

It could also be expected to lead to a one-off increase of 4.0% in UK equity valuations, which would represent a £99.8 billion capital gain. And it would address the lack of liquidity in UK markets by removing a major competitive disadvantage facing the UK.

Due to the wider growth and investment it would promote, and the increase in share prices and pension pots, the measure also has the potential to be revenue-positive. Oxera’s mid-point estimate is that it would increase the overall tax take by approximately £600m.

The report – which is endorsed by major City organisations – urges the Government to make abolition of the tax a key priority in March’s Budget, if the finances permit. Failing that, it urges both main parties to include the policy in their forthcoming manifestos.


Robert Colvile, CPS Director, said:

‘The Government has said it wants to increase business investment, improve the competitiveness of the City and increase economic growth. Abolishing stamp duty on shares would be a massive step in that direction.

‘As the modelling clearly shows, this is not a tax on shares – it is a tax on growth. We therefore urge both parties to abolish the tax at the earliest opportunity. It is bad for savers, bad for growth and ultimately, bad for Britain.’


David Postings, Chief Executive of UK Finance, said:

‘This is an important piece of work by the Centre for Policy Studies. It clearly sets out the economic case for reducing or removing the 0.5% stamp duty levied on share purchases. This is something we at UK Finance have advocated for given it would enhance UK competitiveness and boost investment in UK equities.’


Miles Celic, Chief Executive Officer of TheCityUK, said:

‘Keeping stamp duty on shares has acted as a self-imposed set of manacles. It has undermined the UK’s competitiveness as one of the world’s leading international financial centres. Removing stamp duty will not only enhance the UK’s competitive edge, it will also drive institutional and retail investment in equities, and unleash growth.’



  • ‘Sharing the Wealth’ by Robert Colvile and Gerard B. Lyons, is available here.
  • The full analysis by Oxera is available here.
  • Robert Colvile is Director of the Centre for Policy Studies. Gerard B. Lyons is a former Business Researcher at the Centre for Policy Studies.
  • For further information and media requests, please contact Emma Revell on 07931 698246 and [email protected] or Josh Coupland on 07912 485655 and [email protected]
  • To find out more about the Centre for Policy Studies spokespeople click here.
  • The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, business, welfare, education, housing and green growth, its goal is to develop policies that widen enterprise, ownership and opportunity

Date Added: Monday 4th March 2024