Stamp duty reserve tax (SDRT) is charged at 0.5% of the consideration when someone agrees to transfer chargeable securities, such as UK shares, for money or money’s worth. It covers electronic trades through CREST, where it is collected automatically, and off market deals, where the buyer’s side must notify HMRC and pay by a deadline. If the agreement is later completed by a duly stamped transfer document within six years, the SDRT charge is cancelled.

What does SDRT charge?

The principal charge is in section 87 of the Finance Act 1986. HMRC’s Stamp Taxes on Shares Manual at STSM031030 describes it as arising where person A agrees with person B to transfer chargeable securities, whether or not to B, for consideration in money or money’s worth. The charge does not depend on any document, and STSM031040 confirms it applies equally to written and oral agreements. It applies wherever the agreement is made and whatever the residence of the parties, and whether or not the trade is ever settled.

Under section 91 the buyer, B, is liable, even if the shares are delivered to someone else. Regulations then define an accountable person, usually the broker or other intermediary, who must give notice and pay.

Which securities are chargeable?

Section 99 defines chargeable securities. STSM031090 lists stocks, shares and loan capital; interests in them and in their dividends; options and rights to allotment or subscription; units in unit trusts; and shares in open ended investment companies. Shares in a non UK company are included if they are on a register kept in the UK. Excluded are:

  • securities exempt from all stamp duties, such as most ordinary loan capital
  • shares in a foreign company with no UK register
  • securities admitted to trading on a recognised growth market but not listed on any market
  • interests in depositary receipts, and UK securities already inside an unelected clearance service, for the 0.5% charge

There must be a transfer of an existing proprietary interest, so issuing new shares, a bonus issue or granting a new option is not chargeable (STSM031040 and STSM031100).

When does the charge arise?

The charge arises on the relevant day. For an unconditional agreement that is the day the agreement is made. For a conditional agreement it is the day the last condition is satisfied (section 87(3), STSM031050). A share purchase agreement that is conditional on regulatory approval therefore creates the SDRT charge when approval is given, not when the agreement is signed.

How is SDRT calculated?

The rate is 0.5% of the amount or value of the consideration. Non cash consideration is valued at the price it might reasonably fetch on the open market at the date of the agreement (section 87(7)). Unlike stamp duty, which is rounded up to the next £5, SDRT is rounded to the nearest penny, with half a penny rounded up (STSM031070). A 1.5% rate can apply when UK shares go into a depositary receipt issuer or clearance service. The 1.5% charge on issues of shares into those systems and on certain capital raising and listing transfers was removed from domestic law from 1 January 2024 (STSM053080).

Worked examples

Illustration only. An investor buys 1,000 listed UK shares through a broker at £4.37 each, total £4,370. SDRT at 0.5% is £21.85, which CREST deducts automatically. In a second deal, two investors agree off market for one to buy 10,000 shares in an unlisted company for £27,333. SDRT is £136.665, rounded to £136.67. If the deal is completed by a stock transfer form stamped with stamp duty of £140, the SDRT charge is cancelled.

How is SDRT paid through CREST and off market?

HMRC’s payment guidance explains that CREST deducts SDRT from chargeable trades and pays it to HMRC, with no manual notice. Reliefs within CREST are given by entering a Transaction Stamp Status flag. For example, flag O covers transfers to or from a nominee with no change in beneficial owner, and flag U covers cases where stamp duty is paid outside CREST on a paper document.

For off market trades, the accountable person must send HMRC a written notice giving the buyer and seller, the securities and number transferred, any relief claimed, the consideration and a payment reference. The deadlines are:

Type of trade Notice and payment due
Through CREST, or could have gone through CREST but did not 14 days after the trade
Off market and could not have gone through CREST 7th day of the month after the month of the trade

HMRC’s example is a trade on 19 April with a deadline of 7 May. Where the deadline falls on a weekend or bank holiday, payment should reach HMRC by the previous working day.

How do SDRT and stamp duty fit together?

Most sales of shares in private companies involve both an agreement, which triggers SDRT, and a stock transfer form, which attracts stamp duty on share transfers. Section 92 prevents a double charge. STSM031170 explains that if an instrument is executed under the agreement within six years of the relevant day, transfers all the securities to the buyer or its nominee, and is duly stamped or not chargeable, the SDRT charge is cancelled. Any SDRT paid is repayable if claimed within six years, with interest where the tax is £25 or more.

In practice, private company buyers pay stamp duty on the form and the SDRT charge falls away. Two points catch people out:

  • There is no SDRT sub sale relief. If A agrees to sell to B and B agrees to sell to C before completion, a stamped transfer from A to C cancels SDRT only on the agreement with C; B’s own agreement still bears SDRT.
  • Special rules apply to a company buying its own shares: the SDRT charge is cancelled once the SH03 is duly stamped and filed at Companies House (STSM021260). See company share buyback for the procedure.

Which transfers are exempt or relieved?

HMRC’s SDRT guidance lists exempt paperless transfers including gifts for no consideration, shares left in a will, transfers on marriage or civil partnership and on divorce or dissolution, transfers between trustees, growth market shares and liquidator distributions. Reliefs cover most loan capital, sales to intermediaries, repurchases and stock lending, and transfers to charities. Intra group relief and acquisition relief cannot be claimed directly against SDRT: the documents must be sent to HMRC for stamp duty relief, and if accepted no SDRT is payable. Exempt off market transfers need not be reported, but records should be kept, as HMRC can ask for proof for up to six years.

What penalties apply?

For deadlines on or after 1 January 2015, HMRC’s penalty guidance sets the following for late notification: £100 initially; after six months, a further £300 or 5% of the tax if greater; and after 12 months, another £300 or 5% if greater, with higher amounts possible where information was deliberately withheld. Daily penalties of £10 for up to 90 days can be charged after a written notice once a failure has continued for three months. HMRC’s example of a notice 16 months late on £20,000 of tax gives penalties of £2,100. Late payment attracts 5% of the unpaid tax 31 days after the due date, with further 5% charges at five and eleven months after that penalty date. Interest also runs on late tax. HMRC may reduce or not charge a penalty where reasonable care was taken.

What are the common mistakes?

  • assuming no tax is due because no stock transfer form was signed
  • missing the shorter 14 day deadline for a trade that could have gone through CREST
  • overlooking SDRT on a conditional agreement when the last condition is met
  • valuing share or asset consideration at a date other than the agreement date
  • forgetting the separate SDRT charge on an intermediate agreement in a sub sale

The capital gains side of selling shares is covered in the substantial shareholding exemption for companies and share matching rules for individuals.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.