New draft legislation has been published for the introduction of a new ‘Securities Transfer Tax’ (STT), to be introduced in 2027. It is intended that STT will replace the current dual system of stamp duty and stamp duty reserve tax on the transfer (or agreement to transfer) shares and securities.
The new tax will be a single, digital, self-assessed tax which will remove the need for paper-based accounting for duty. The headline tax rate for STT remains 0.5% and key exemptions and reliefs which are currently applicable for stamp duty and stamp duty reserve tax will largely be retained (and rounding up duty to the nearest £5 will no longer be necessary). Below are five key practical points which business owners, investors and shareholders should note:
The move to a fully digital reporting and payment system is to be welcomed. Under the proposed regime, STT returns will be filed online and HMRC will issue a transaction reference immediately upon payment or relief claim. Company registrars will then be able to update ownership records straight away (which avoids the delay in receiving back HMRC’s confirmation of stamping, which is particularly useful on reorganisations or demergers with inter-dependent steps).
A notable change is the proposed move to a broader concept of consideration based on ‘money’s worth’. Currently, tax on the transfer of shares or securities is chargeable by reference to what cash or other shares are provided as payment (or where payment is in the form of the assumption or release of a debt). The draft STT legislation adopts a wider approach by providing that STT will be chargeable on the money’s worth (which captures more potential payment forms, such as the provision of real property for example). This may also affect the structuring of private company acquisitions. For instance, where a target company owes debt to a seller, it is common for the share purchase price to be reduced and for the buyer to undertake separately to procure repayment of the debt. Under the current rules that repayment obligation may not attract stamp duty, but under the proposed ‘money’s worth’ concept there is a possibility that it could be treated as part of the consideration for the shares. Businesses undertaking acquisitions should therefore review transaction structures carefully once the final legislation is published.
The current stamp duty treatment of contingent, deferred and unascertainable consideration is often complex and can produce unexpected results. The new STT regime proposes a more straightforward approach. Where consideration is not known at the time the tax charge arises, STT will generally be paid on a reasonable estimate and adjusted when the final amount becomes known. This will be particularly helpful for transactions involving completion accounts adjustments, earn-outs and other deferred consideration mechanisms. The requirement to pay duty on the maximum stated amount of consideration for a share transfer on the assumption it will happen is also being removed. There will also be a deferral mechanism for certain payment amounts that depend on uncertain future events and are not expected to become known within six months.
The draft legislation clarifies the territorial and jurisdictional reach of the new STT. In particular, shares in non UK-incorporated companies will generally fall outside the scope of STT, regardless of where transfer documents are actually executed or where the transaction is implemented (which is a relevant factor under the current system). This may well simplify transactions involving international groups and overseas holding companies, as well as non-resident buyers. Shares in UK-incorporated (and UK resident) companies remain within the STT charge.
The key reliefs relied upon in corporate transactions, including group relief and reconstruction relief, are expected to remain available under STT (albeit further detail is expected on reliefs for demergers). However, instead of requiring many reliefs to be cleared through HMRC’s current adjudication process, claims will generally be made through the online filing system, which should speed up transactions. HMRC will have enquiry powers and the ability to impose assessments, penalties and interest where it considers returns to be incorrect. As a result, businesses may find that STT becomes a more important due diligence item in future corporate acquisitions and reorganisations.
Although the headline tax rate for STT remains the same, the new regime represents a significant reform in the UK tax landscape. The consultation on the draft legislation closed on 7 September 2026 and an update on the proposed commencement date of the new STT regime is expected in the Autumn of 2026. There will be transitional provisions in place where transfers of securities have taken place before the commencement date but the relevant transfer tax is not due to be paid until after the commencement date. With the change being imminent, clients contemplating acquisitions, restructurings or buybacks over the coming months should keep a close eye on the final legislation, accompanying HMRC guidance and our follow-up note here.
Please contact Anthony Reeves or Cathy Bryant if you require any further information on this subject.
