Stamp Duty Reform in 2025: Will Scrapping Share Tax Boost the LSE?
The UK government’s decision to reform stamp duty on share trading in 2025 has sparked intense debate among investors, policymakers, and market analysts. In a move aimed at revitalizing the London Stock Exchange (LSE), the long-standing 0.5% tax on buying UK-listed shares—commonly known as Stamp Duty Reserve Tax (SDRT)—is set to be either significantly reduced or scrapped altogether. The big question: will this reform breathe new life into the struggling LSE?
The State of the LSE
The LSE has seen a noticeable decline in recent years. Once a global hub for listings and capital markets, it has been eclipsed by rival exchanges in New York, Amsterdam, and Hong Kong. Post-Brexit regulatory uncertainty, a string of high-profile delistings, and the migration of tech IPOs abroad have all contributed to waning investor confidence.
Trading volumes on the LSE have stagnated, and the number of companies choosing to list in London has dropped sharply. Critics argue that the SDRT, introduced in 1986, is an outdated impediment that disincentivizes domestic and international investment in UK equities.
Reform or Repeal?
Chancellor Jeremy Hunt has signaled openness to reform, and a government-commissioned review earlier this year recommended eliminating SDRT to make UK markets more attractive. Proponents believe that scrapping the tax could help level the playing field with exchanges that impose no such levy, such as the U.S. markets.
Abolishing SDRT would reduce the cost of trading UK shares, potentially increasing liquidity and enticing institutional investors back to the LSE. Advocates also argue that this could stimulate retail investing, aligning with broader goals to democratize finance and deepen the UK’s capital markets.
However, critics warn that the move may result in a significant loss of tax revenue—estimated at over £3 billion annually. Others caution that removing SDRT without addressing deeper structural issues, such as regulatory burdens and a lack of high-growth tech listings, may have a limited impact.
Potential Impact on Investors and Companies
If SDRT is scrapped, retail investors could benefit most immediately. Lower trading costs may encourage more frequent investing, particularly through platforms offering commission-free trading. For institutional investors, increased liquidity and lower friction costs could make UK equities more appealing, boosting demand and possibly valuations.
From the corporate perspective, a more attractive LSE could reverse the trend of companies choosing to list abroad. A more liquid market with stronger investor appetite could raise capital more efficiently, benefiting high-growth UK firms and startups.
Conclusion
While the proposed stamp duty reform in 2025 has the potential to boost the LSE, its effectiveness will depend on the broader context of UK market competitiveness. Scrapping SDRT could be a meaningful step toward revitalizing London as a leading financial center, but it is not a silver bullet. For the LSE to truly recover its global standing, reforms must be holistic—targeting regulation, innovation, and investment culture alongside tax policy.
The months ahead will be crucial in determining whether this tax reform becomes a catalyst for transformation—or merely a symbolic gesture in a deeper identity crisis for the UK’s financial markets.
Published: 5th July 2025
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