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Stamp Duty - 10/07/2008
Stamp duty originated in the 17th century when duty stamps could be purchased and attached to a transactional document to prove that any tax due on the transaction had been paid.
Today, tax relating to the purchase of land and shares is known as “Stamp Duty”, or, more correctly, Stamp Duty (or Stamp Duty Reserve Tax) for shares and Stamp Duty Land Tax for property.
The amount of stamp duty payable has been the subject of debate over recent years because the thresholds at which higher rates apply have not risen as much as the increase in property prices. This has meant that people buying a property today often have to pay much more stamp duty than they would have on the same property a number of years ago.
There is also confusion as to whether the rate bands are incremental as with income tax (ie escalating rates on successive portions) or applied once on the whole amount. The answer is the latter, and the following is the current banding table for most properties:
A property costing up to £125,000 (or £150,000 in defined “disadvantaged” areas) – nil
A property costing between £125,001 and £250,000 – 1% of the purchase price
A property costing between £250,001 and £500,000 – 3% of the purchase price
A property costing over £500,001 – 4% of the purchase price
Buyers should be aware of the stamp duty liability and budget accordingly in their calculations when making an offer on a property.
Sellers would be well advised to consider the above also when pricing their property as there are likely to be more buyers just under a threshold, than over it.
