In another effort to support London’s moribund capital markets, the chancellor announced a three-year stamp duty exemption on trading in shares in companies listing in the UK.

The relief from 0.5% stamp duty reserve tax applied to the value of purchased in newly listed companies begins tomorrow.

In her speech, Rachel Reeves made it sound as if the move was to attract overseas companies to list in London. “If you build here, Britain will back you,” she told MPs.

However, Treasury documents make it clear that the stamp duty holiday applies to all newly listed companies. At the margin, it could encourage more investors to buy companies shares after their initial public offers (IPOs) or flotations.

Reeves claimed that along with her ISA reforms, an extra £4bn could flow into UK shares.

The purchase of shares in an IPO is already exempt from stamp duty. This measure applies to secondary trading once companies have floated.

The Treasury estimates this will cost the Exchequer £25m in 2025/26 rising to £50m in 2028/29 although this assumes future listing activity is in line with the nine-year average up to 2023/24 when £14bn-£17bn was raised in new listings each year.

However, according to LexisNexix, just £150m raised by companies floating on London’s main market last year, down 76% from £618m in 2023. 

Investors will hope the government’s move could be a precursor to abolishing stamp duty on shares altogether. This would help put “closed-ended” investment companies and investment trusts on a level with open-ended investment companies where generally stamp duty does not apply.