eToro starts charging stamp duty

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eToro has stopped absorbing stamp duty on UK share deals, so now customers have to pay it themselves.

eToro clients must now pay stamp duty

As part of eToro’s ongoing commitment to transparency, they emailed customers to inform them that starting from November 6, 2023, they will be passing a Stamp Duty Reserve Tax onto clients who open new positions in UK-listed stocks.

In the past, eToro has absorbed this tax on behalf of clients who invested in UK stocks, however, they will now be aligning with industry-standard practice by passing this cost onto clients.

What is Stamp Duty?

Stamp duty is a regulatory transaction tax levied by the UK government on the electronic purchase of all UK-listed stocks. It is currently set at 0.5% of the value of the stock purchase. This is a mandatory regulatory transaction tax that applies to all clients trading UK-listed stocks, regardless of their country of residence.

Key points to note:

  • Stamp Duty applies only to UK-listed stocks on the London Stock Exchange (LSE). ETFs containing UK stocks will not be affected.
  • The tax is levied only when opening a new position starting November 6, 2023. Existing positions will not be affected.
  • It is calculated as 0.5% of the total USD value of the opened position.
  • There is a minimum fee of $0.01. If the calculated amount of Stamp Duty is less than $0.01, there will be no tax applied.
  • Stamp Duty is not applicable for CFD trades.
  • eToro does not generate any revenue from Stamp Duty. The tax is passed on to His Majesty’s Revenue and Customs (HMRC).

How to avoid paying stamp duty on UK shares?

If you don’t want to pay stamp duty on UK shares, the easiest way to avoid the charge is to trade an equity derivative. These are products that are derived from the share price of a company like share CFDs or spread bets on shares.

With CFDs and financial spread bets you are not buying or selling the underlying assets you just speculate on the price going up or down. CFDs are the difference between the opening and closing price of a trade, but in practice are the same as buying 10,000 shares in a company. Spread bets are an amount per point move bet rather than an investment. So instead of buying 10,000 shares, you are betting £10 per 1p move in the share price.

eToro does not offer financial spread betting, but you can trade CFDs with the. However, eToro have very expensive overnight funding compared to other brokers, so if you are holding a position longer than a few weeks the cost of daily financing will be more than stamp duty.

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