The Securities Transfer Tax (STT) should make routine share transfers faster and cleaner, turning a historic ‘voluntary’ documentary tax into a mandatory self-assessment regime.
Published: 29 July 2026
Authors: Daniel Kennedy
The Securities Transfer Tax (STT) should make routine share transfers faster and cleaner, turning a historic ‘voluntary’ documentary tax into a mandatory self-assessment regime with filing obligations, amendment mechanics, repayment rules and percentage-based penalties.
On 13 July 2026, the government published draft legislation for a new Securities Transfer Tax (STT).The new tax is intended to replace both ad valorem stamp duty and stamp duty reserve tax (SDRT) from 2027, bringing the UK’s share transfer taxes into a single digital, self-assessed regime. Comments on the draft are invited by 7 September 2026, with legislation expected to be included in Finance Bill 2027 with the new tax to take effect in Autumn 2027.
Stamp duty is an archaic tax on documents, while SDRT taxes agreements to transfer chargeable securities (with no requirement for agreements to be in writing). The overlap between the two can be awkward in practice, as the two taxes don’t always dovetail. The STT is designed to replace the fragmented two-tax framework with a single online process, immediate acknowledgement and a tax charge that is triggered by the transaction rather than a document.
0.5% charge on consideration in money or money’s worth
The STT will apply when a person agrees to transfer 'chargeable securities' for consideration in money or money's worth. Chargeable securities will include shares and equity-like debt interests in UK incorporated companies, and units in certain unit trust schemes, together with certain related interests, options and subscription rights. The main rate of the STT will be 0.5% of the consideration, in money or money’s worth, with the charge arising on an agreement to transfer chargeable securities rather than on a stamped instrument.
The concept of chargeable consideration is much broader than under ad valorem stamp duty where the tax only attached to certain types of consideration. One significant question which has arisen is whether the broadening of the concept of ‘chargeable consideration’ means that tax will be payable by reference to the buyer being obligated to procure that the target company being purchased repays debt on completion (a common and well established means of structuring purchases which minimizes the amount of stamp duty payable) and, if this is now seen as chargeable consideration, how does one value that act of procuring?
The ‘buyer’ will be liable to pay the tax. The draft legislation defines the ‘buyer’ as the person by whom the consideration for the transfer is payable and makes it clear that the buyer may differ from the transferee.
Removal of £1,000 de minimis
The draft legislation removes the £1,000 de minimis exemption (treating transactions with consideration of less than £1,000 as exempt from stamp duty). So smaller transfers, eg from minority shareholders, regardless of the consideration, will come within charge, assuming the draft legislation is enacted in its current form.
Stamp duty is currently rounded up to the nearest £5. The STT will not follow this approach and amounts of STT that are payable shall be rounded to the nearest whole penny.
This brings into charge a very large number of transactions that have previously been outside of the scope of the old regime by reason of falling below the £1,000 threshold. This creates a significant administrative burden in connection with what are low value transactions.
Equity incentives
In particular, the removal of the £1,000 de minimis will result in additional tax obligations for option holders who exercise their options in exchange for existing shares that are transferred to them, as well as for employee benefit trusts involved in transferring shares to employees, where the low levels of consideration currently don’t attract stamp duty.
Option holders will be personally liable to pay any STT whenever they exercise their options (assuming those options are satisfied by a transfer of existing shares). Where an M&A transaction requires the exercise of options prior to completion (where options are satisfied by the transfer of shares rather than an issue of new shares), any such exercise will incur the STT and this must be paid by the ‘buyer’, ordinarily the option holder, before completion.
A cashless exercise may, therefore, result in the corporate ‘buyer’ being liable for the STT rather than the option holders. This would greatly simplify any option exercise process immediately prior to completion. The alternative would be for legal advisers to be authorised by the option holders to pay stamp duty on their behalf. This would likely result in the adviser being an ‘accountable person’, where an accountable person will be jointly and severally liable for the STT. Legal advisers may therefore be reticent to fulfil this role.
Our more detailed article ‘What the new Securities Transfer Tax means for equity and incentives’ can be found here.
Same-day registration
Companies will still be restricted from registering certain transfers in the statutory books of the company unless they have evidence that the STT has been paid. However, taxpayers will now file and pay through an online process rather than needing to wait for a stamped stock transfer form. This should enable same-day registration of legal title and will expedite the writing-up of the register of members post-completion. This will be particularly beneficial in the context of pre-sale reorganisations where delays in stamping stock transfer forms currently create friction.
‘Substantial completion’ for shares
One feature of the draft regime is the importation of SDLT-style timing concepts. Under the proposed rules, the STT can arise on the earlier of completion and ‘substantial completion’. The policy objective is clear: where the buyer has obtained the economic benefits of ownership, the tax charge should not be delayed simply because the contract has not technically completed.
This will require consideration where exchange and completion are not simultaneous, completion is conditional and/or where shares/rights are transferred in stages. Advisers will need to focus on when the buyer has, in substance, received the benefits and burdens of ownership - for example voting rights, dividend entitlement, control over the shares or the ability to direct their sale. Although the concept is familiar from land transactions, its specific application to securities will benefit from HMRC guidance.
Contingent, uncertain and deferred consideration
The draft rules should produce a fairer outcome for consideration that is deferred, contingent or unknown at completion. Under the current stamp duty rules, duty is generally calculated once and for all by reference to the consideration known, or capable of being ascertained, when the instrument is executed. Where the consideration is contingent, the ‘contingency principle’ can require duty to be calculated on the assumption that the contingency will occur, even if the amount is never ultimately paid. Conversely, genuinely unascertainable consideration may fall outside stamp duty altogether. Very often this results in tax being paid by reference to a value which does not match the actual consideration eventually paid by the buyer.
The draft STT legislation provides that if the amount of consideration is unknown, the buyer is expected to make a reasonable estimate and pay tax on that basis. If the consideration is uncertain, it may be possible to defer payment in respect of the uncertain amount. Once the final amount becomes known, the STT can be recalculated and any additional tax paid or overpayment reclaimed. It is noted that this requires buyers to continue to monitor the stamp duty position after completion (in contrast to the ‘once and for all’ approach under ad valorem stamp duty). Interest will accrue where tax is not paid within the initial 30-day payment window, so buyers will need to take this into account when calculating any reasonable estimates and eventually settling the final tax amount.
Reliefs, reorganisations and partnership structures
Group relief, reconstructions and acquisitions relief, intermediary relief and the ‘growth market’ exemption will continue to be available under the STT. Share buybacks will be treated in the same way under the STT as under the existing rules.
The draft provisions for group relief include restrictions (as they do for stamp duty) where arrangements involve third parties, and further guidance may be needed on how those rules apply where bank funding is used in a group reorganisation.
Transfers of partnership interests are excluded from the STT, however the draft legislation does include a targeted anti-avoidance provision, to prevent partnership arrangements being used to transfer economic ownership of shares without a charge.
Practical implications for transactions
The reforms should reduce delays, especially where parties currently wait for HMRC stamping confirmation before updating the register of members. At the same time, the introduction of the STT will require advisers to consider:
- whether the tax point could arise before formal completion of the share transfer because of substantial completion
- who is responsible for filing, payment and dealing with any shortfall or overpayment
- how deferred, earn-out or completion accounts consideration will be estimated, trued up and/or deferred
- what evidence is needed for reliefs and exemptions, and when it must be available
- whether transaction documents should include specific STT covenants/indemnities/warranties, undertakings and information rights
- how to manage small transfers that previously relied on the £1,000 stamp duty de minimis, which will now require returns to be made.
Final thoughts
The STT should simplify the UK’s share transfer tax regime. It replaces an anachronistic documentary tax with a single digital charge, removes much of the stamp duty/SDRT overlap and should make registration of legal title faster in routine transactions. It should result in fairer calculations of tax and avoid the current situations where the tax is levied by reference to a different value than the consideration actually provided for the shares (which can work both for and against the taxpayer). However, the removal of the £1,000 de minimis will increase reporting obligations and may complicate some completion processes where there are multiple option holders and/or minority shareholders. We expect there to be considerable lobbying for the threshold to be re-applied ahead of the introduction of the tax in Autumn 2027.
For further advice please contact your usual Shoosmiths contact.