When you invest in UK-based companies via the London Stock Exchange, you may be liable to pay Stamp Duty Reserve Tax. The tax is automatically paid when making transactions over £1000.
The broker is usually responsible for collecting the tax payment, though you won’t pay any stamp duty on investments worth less than £1000. The rate of stamp duty that investors pay is 0.5%.
For example, if you invested £2000, you’d pay just £10 in stamp duty. This may not seem like a lot, but If the investor paid £10 as a transaction fee as well, they would start in a -1% position on £2000.
The good news is that Stampy Duty is only payable in the UK stock market. If you invest in foreign stocks, you won’t pay it. This is especially important to know if you are a British citizen.
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