Announcing the Budget in the House of Commons yesterday, Mr Osborne said AIM (Alternative Investments Market) was vital to help firms raise funds.
He said: "Many medium-sized firms and start-ups use AIM to raise funds to help them grow. Many observers of the British tax system complain that it has long biased debt financing over equity investment. So today I am abolishing altogether stamp duty on shares traded on growth markets such as AIM."
This will come into force in April 2014 and also apply to stamp duty reserve tax (SDRT). There is also a Government consultation on allowing AIM shares to be eligible for stocks and shares Isas.
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Andy Bell, chief executive of AJ Bell, said: "The combination of abolishing SDRT with allowing AIM shares to be held in Isas is going to open up a significant investment market to a number of growing companies. Our experience in the DIY Sipp market has shown how popular these shares are with a wide range of investors. We expect a surge in that popularity once the AIM restrictions are removed and the cost of investing goes down."
Brett Williams, managing partner at Old Burlington Investments, said: "We welcome the Chancellor's decision to abolish stamp duty on shares traded on growth markets such as AIM as this will encourage investment in the country's smallest businesses.
"As well as having the potential to bring about crucial economic growth, this will be attractive for investors who are looking to supplement mainstream assets and create more balanced portfolios."
Tony Stenning, head of UK retail at Blackrock, said he "wholeheartedly" welcomed the change.
He said: "These have long been perceived as stealth taxes hampering savers' needs for their money to work as hard as possible for them, particularly during these hard times of low interest rates.
"Hopefully the removal of the stamp duty on UK funds and AIM shares introduced in the 2013 Budget will help Brits to help themselves build a bigger retirement pot."

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