Stamp Duty

What is Stamp Duty?

Stamp duty was originally introduced in the United Kingdom in 1694, as a temporary measure, but proved such a successful a method of taxation that it’s remained in use ever since.

The name derives from individuals originally having to purchase a “stamp” as a method of paying the tax.

Documents that have had the tax levied include (but not limited to) Insurance policies, documents used as evidence in court, grants of probate and even lottery tickets.

Stamp Duty Land Tax

Stamp Duty Land Tax (SDLT) was introduced in the Finance Act 2003. It’s used as a self assessed tax on the transfer of property and land. The taxable amount must be returned to HM Revenue and Customs within 30 days of the effective completion of the purchase or various fines may be levied.

Further penalities are liable if the SDLT return is incorrectly completed.

Stamp Duty Land Tax is payable by the purchaser of the property (or land) and is due at the end of the conveyancing process. Once the return has been received by HMRC, they will issue a certificate, without which it is impossible to transfer the title in the future.

Stamp Duty Land Tax Bands

There are various “bands” for which the amount of Stamp Duty Land Tax varies depending on the price paid for the property or land.

The current tax bands are as follows:
Purchase Price Rate

£0 - £175,000* at 0%
£175,001 – £250,000 at 1%
£250,001 - £500,000 at 3%
Above £500,001 at 4%

*This band was increased from £125,000 from 3 September 2008 for 1 year.

The leap in stamp duty fees can be quite painful depending upon the amount you’re paying. ie. a house purchased at £500,000 would pay £15,000.00 in stamp duty, whilst a house purchased at £500,001 would pay £20,000.04. This will often make houses with an asking price just inside a higher tax band harder to sell due to the sudden increase in tax.

If the property is a new build and has zero-carbon emissions (i.e. has a net carbon usage of zero) and has been purchased for less than £500,000, then the purchaser is exempt from having to pay any stamp duty.

In certain situations it’s possible to purchase a property and state that you’re buying the property for “X” with a further consideration of “Y” for fixtures and fittings.... this can help in situations where you’re buying a property very near to a specific Stamp Duty threshold yet you don’t want to pay the Stamp Duty at the higher level.

You should speak to your conveyancing solicitor about this matter prior to proceeding.

07.01.09