UK Financial Transaction Tax under Labour

Proposals to introduce financial transactions taxes in the UK and the EU have been around for a while. Although neither tax has yet come close to becoming law, political turbulence could now make this more likely.

The Labour Party has recently attracted new attention for its proposal to introduce a UK financial transactions tax (UK FTT). If, as seems possible, a general election is coming, there is a chance that the Labour Party could soon be in a position to implement its proposals. Consequently, below, we take a quick look at what the proposed UK FTT might look like.

2017 Labour Party Manifesto

The Labour Party signalled its intention to introduce a UK FTT in its 2017 manifesto1. Its proposal was to extend stamp duty/stamp duty reserve tax (SDRT) to "corporate bonds and equity and credit derivatives transactions" and to amend the "intermediary exemption on share transactions".2,3    The proposal was based on a 2017 report by Intelligence Capital (which has been described by Reuters as a financial advisory firm).4,5    This report recommends removing the intermediary exemption and instead taxing intermediaries at a reduced rate of 0.2%.

It was (and still is) unclear how the Labour Party would seek to implement these changes. In particular, it is not clear how the loan capital exemption could survive in a tax aiming to tax transfers of corporate bonds, so the Labour Party could seek to amend (or even remove) it.

Recent developments

Intelligence Capital produced a supplementary report in September 2019 (the "2019 Report") which recommends further expansion of the proposed UK FTT.6

In particular, the 2019 Report proposes that the tax would also apply to transactions involving foreign exchange and commodities, related derivatives (e.g. foreign exchange swaps) and interest rate derivatives.

The 2019 Report draws a distinction between 'financial' and 'non-financial' firms, with the former taxed at a lower rate (on the understanding that they have lower transaction costs, such that a lower tax rate results in the same proportional increase in overall transaction costs). The rates proposed in the 2019 Report are as follows:

  1. Foreign exchange spot and derivatives: 0.02% for financial firms and 0.06% for non-financial firms
  2. Interest rate derivatives: 0.01% for financial firms and 0.03% for non-financial firms
  3. Commodity spot and derivatives: 0.04% for financial firms and 0.12% for non-financial firms.

In a departure from the current stamp duty/SDRT rules, the proposal would see tax on these transactions imposed on end user purchasers who are UK tax residents (to try to avoid the risk of capital flight that might arise if the tax were based on the location of the trades).

John McDonnell, the Labour Party Shadow Chancellor, has endorsed the 2019 Report and it has been reported that he will push for the proposals to be included in the next Labour Party manifesto (which we expect will be published when a general election is called).7   Neither John McDonnell nor the Labour Party appears to have specified which parts of the 2019 Report it would seek to implement. We await further details on this.

Co-author: Rebecca Rose, Trainee Solicitor


1. https://labour.org.uk/wp-content/uploads/2017/10/labour-manifesto-2017.pdf

2. https://labour.org.uk/press/financial-transaction-tax-report-john-mcdonnell-responds/

3. https://www.robinhoodtax.org.uk/sites/default/files/Improving%20resilience,%20increasing%20revenue%20-%20May%202017.pdf

4. https://www.robinhoodtax.org.uk/sites/default/files/Improving%20resilience,%20increasing%20revenue%20-%20May%202017.pdf

5. https://uk.reuters.com/article/fund-doubts/champions-of-u-s-superfund-seen-losing-argument-idUKNOA32516320071023

6. https://progressiveeconomyforum.com/wp-content/uploads/2019/09/Reinforcing-Resilience.pdf

7. https://www.cityam.com/john-mcdonnell-to-back-widening-of-uk-financial-tax/



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