It’s a phrase that landlords and buyers fear. But many do not understand how the tax works and how it applies to your property transaction. Simply, Stamp Duty Land Tax (SDLT) is a tax paid on any property purchase of more than £125,000.
The History of Stamp Duty
Stamp Duty was introduced in England in 1694 during the reign of William and Mary. It was used as a transaction tax to raise money for war against France and was applied to goods including hats, newspapers and patent medicines. Eventually the tax would only be levied on property transactions
Stamp duty was instrumental in the outbreak of the American War of Independence which was encompassed in their slogan “no taxation without representation”
Modern Day Stamp Duty
Up until 1997, home buyers only paid 1% tax on properties costing more than £60,000. Former Prime Minister and then-Chancellor Gordon Brown introduced a system of bands, meaning a higher percentage of stamp duty depending on the value of a property. At the time, the highest band was set at £500,000.
In the intervening decades, the lower and upper thresholds have been raised in response to rapidly rising house prices.
The biggest shock to the property market came in December 2014, when George Osborne abolished the slab structure and introduced progressive charges and increasing the levy on homes costing more than £937,000.
|
Price of Property |
Stamp Duty Payable |
|
Up to £125,000 |
0 |
|
The portion from £125,001 to £250,000 |
2% |
|
The portion from £250,001 to £925,000 |
5% |
|
The portion from £925,001 to £1.5 million |
10% |
|
Anything above £1.5 million |
12% |
Whilst the government claims 98% of home buyers now pay less stamp duty than in the past, the new bands have been blamed for the slowdown of the property market.
Stamp duty must be paid within 30 days of buying the house, with talk of shortening the period to 14 days.
