UK Investors Demand Stamp Duty Scrap to Boost London Market Investment
New research indicates that British investors are calling for the complete removal of stamp duty on UK shares and investment trusts, arguing this would significantly boost capital allocation to the London market.
Overwhelming Support for Tax Reform
According to the latest poll from investment platform Interactive Investor, a substantial 75 per cent of investors confirmed that scrapping stamp duty on UK shares and trusts would prompt them to take greater interest and potentially invest more capital domestically.
This demand follows last year's Autumn Budget measure that granted newly listed companies on the London index a three-year stamp duty holiday. While City officials welcomed this temporary relief, many are now urging the Chancellor to implement more permanent reform by eliminating the tax entirely.
Global Competition and Market Preferences
The push for stamp duty removal comes as the UK faces increasing competition from global markets that impose no such tax on share transactions. The United States, with its minimal regulation and attractive AI stock offerings, has been particularly successful in luring British investors overseas.
Despite this international competition, the UK continues to maintain its position as the most popular investment region for British investors this year, with 37 per cent confirming their intention to focus on domestic opportunities.
In contrast, interest in US markets appears to be declining among UK investors, with just 17 per cent currently looking to invest there, down from 20 per cent in June. Meanwhile, investors are expanding their horizons to include emerging markets, particularly in Asia, which offers technology and AI investment opportunities outside the current AI bubble.
Geopolitical Concerns and Investment Strategy
Ongoing geopolitical tensions have emerged as the most significant threat to investor portfolios, with 44 per cent of respondents expressing concern about this factor. This represents an 11 per cent increase compared to six months ago.
Additional concerns include:
- Fears of tariffs and potential trade wars
- The overall state of the UK economy
- Changes to the tax regime following the Autumn Budget
These uncertainties have led nearly half of investors to maintain their current investment strategy, allocating the same amount of capital as last year. Just over a quarter of respondents indicated they plan to invest more despite the challenging environment.
Interactive Investor's Esmund commented: "It's still very early in the year, so it'll be interesting to see if investors' strategies shift should these geopolitical tensions escalate in the coming months. But so far, retail investors are prepared to hold their nerve despite uncertainty and invest for the long-term."
Autumn Budget Impact and Tax Concerns
Following the November Autumn Budget, nearly half of investors cited changes to the tax regime as their primary concern. The Budget introduced significant modifications to the UK tax system, including:
- A freeze to income tax thresholds
- A new council tax surcharge on properties valued over £2 million
- Increased dividend taxes
These changes prompted over a quarter of investors to express worries about fiscal drag, while 11 per cent specifically noted concerns about dividend tax increases. Additional concerns included changes to ISA allowances and salary sacrifice arrangements, though these were mentioned by just five and four per cent of respondents respectively.
In response to the cash ISA reductions and dividend tax overhaul, Esmund emphasised the importance of utilising tax-free wrappers such as stocks and shares ISAs, which can "shield our wealth from being eroded by the ongoing individual tax burden."
The research highlights the complex interplay between tax policy, global competition, and investor confidence in the UK market, with stamp duty reform emerging as a key demand from the investment community.
