Aarti Joshi: To ‘Back Britain’, we must stop taxing the City out of existence

Aarti Joshi is a Tax Director at a FinTech. She was a Conservative parliamentary candidate at the 2024 general election.

We are taxing our Stock Exchange out of existence, though the Treasury talks about ‘Backing Britain’.  

In order to encourage investment in British companies and for the UK to become a share-owning democracy, it is time to cut specific taxes and turn the temporary holiday on Stamp Duty Reserve Tax (SDRT) into a permanent reality.  

In the mid-1980s, the Conservatives created a property-owning, share-owning democracy by reforming the predecessor to stamp duty on shares and deregulating the Stock Exchange. We can create a new Big Bang by incentivising retail investment in UK-listed companies through abolishing stamp duty on shares. The Conservative opposition should pledge to abolish SDRT. 

At 0.5 per cent, SDRT, a tax paid by the purchaser of UK listed-shares, is internationally uncompetitive. The US and Germany do not have stamp duty on shares.  France, Italy and Spain have a lower tax ranging from 0.1 per cent to 0.3 per cent, applying only to the largest companies.  

Stamp duty relief for newly listed companies was included by the Chancellor in her budget in November as part of a package designed to make the UK “the best place in the world” for early-stage enterprises and to encourage new UK listings.  

The initial evidence shows that the announcement of the stamp duty holiday, (the exemption from SDRT for purchasers of shares in newly UK-listed companies for three years after the listing) has been accompanied by an increase in companies IPOing in London in the final quarter of 2025.  

The London Stock Exchange saw £1.9 billion raised from 11 IPOs in 2025 with a rebound in Q4, with fintech company Shawbrook and consumer company Princes Group pricing their IPOs at the end of October. This was the London Stock Exchange’s strongest year for new listings since 2021. 

Britain should make the most of the uncertainty around US government policy by introducing tax incentives so that companies choose to list in London over markets in the US, and elsewhere. 

A recent survey by RSM UK shows that over 76 per cent of 300 Tech businesses said that they are considering listing on the public markets within the next five years and of those with plans to become a public company, 57 per cent, would choose to list in the UK, up from 53%. In contrast, only 26 per cent of Tech businesses would choose to list in the US, a large drop from 47 per cent in the previous year.  

Outside of the US and China, the UK has been at the forefront of funding and the destination of choice for Tech start-ups over the past twenty years. 

The exemption from SDRT should be made permanent for all companies in order to enhance the competitiveness of the London Stock Exchange, and to increase retail investment in UK shares, creating a new generation of shareholders.   

Analysts have long argued that the duty is distortive and that it has disincentivised investment in UK listed-companies, particularly by retail investors. The CEO of interactive investor argued that ‘we are taxing the stock exchange out of existence. We tax every purchase on the main London market 0.5 per cent. Not a lot, you might say. Yet, it’s 2.5 times higher than European Union countries charge. New York – our main competitor – does not charge at all’.   

0.5 per cent SDRT says a lot about our attitude as a country to share ownership. These reforms would boost business investment and create a new generation of shareholders and capitalists and hopefully, free market Conservatives. 

The Centre for Policy Studies argues in their paper ‘Retail Investment: Making the case for wider share ownership’ that those with Cash ISAs should be made aware of the potential returns available from investing in Stocks and Shares ISAs, and that the tax treatment of retail investment should be examined. 

The Government has announced that it will lower tax-free cash ISA thresholds from £20,000 to £12,000 from April 2027 to encourage people to move savings from cash to shares, yet SDRT makes the act of “moving”, particularly into UK-listed equities, expensive. It is a tax on investing in UK companies.  

The damage isn’t limited to listed companies; the Government is also creating a Growth Trap for Britain’s youngest, most promising startups. A few weeks ago, The Times reported that the Association of Investment Companies, the trade body for Venture Capital Trusts (VCTs) warned that the Chancellor’s proposed reductions to income tax relief on investors in VCTs will harm growth for small businesses and lead to “a collapse in funding for Britain’s high-growth businesses”.  

Venture Capital Trusts (VCTs) are UK-listed investment vehicles that pool capital to invest in small, high-risk, early-stage companies. An investment into a VCT company provides 30 per cent income tax relief up to a maximum investment of £200,000 per year and this is being reduced to 20 per cent from April 2026 by the Chancellor. 

The last time income tax relief was cut, from 40 per cent to 30 per cent in 2006, fundraising by VCTs fell by two-thirds and did not recover for 16 years. These incentives exist to encourage investment into young, growing UK businesses that otherwise struggle to secure capital.  

The 30 per cent income tax relief for individuals investing in VCTs should be reinstated immediately to prevent history repeating itself. 

The evidence from the final quarter of 2025 is very clear: when Government lowers the barriers to entry, the market responds. The increase in London IPOs shows that there is appetite to invest in Britain, companies and retail investors just need the correct tax incentives.  

To actually “Back Britain,” we cannot afford temporary holidays and contradictory tax hikes. By making the Stamp Duty Reserve Tax exemption permanent for all London-listed companies and restoring the 30 per cent VCT income tax relief, we can bridge the funding gap that threatens our most promising companies. 

The Shadow Treasury team should push for this to show our serious intent with growing businesses.   

It is time to stop taxing the Stock Exchange out of existence and start powering the next generation of British Tech giants and creating a new generation of shareholders.