Stamp Duty Information. Always ask your solicitor to clarify these costs.

Stamp Duty Explained

Stamp Duty is the tax payable to the government for changing the documents that specify who owns a particular property.

Stamp duty was first introduced in the UK in 1694; and continues to this day through a series of stamp acts.

Stamp duty land Tax

The "Stamp duty land tax" (SDLT) was introduced by the Finance Act 2003. It largely replaced stamp duty with effect from 1 December 2003. SDLT is a form of self-assessed transfer tax charged on "land transactions".

For typical transactions in land, such as the buying and selling of a residential house, there is little change from stamp duty, except that a tax return is required to be made to the HM Revenue & Customs (previously Inland Revenue) and documents no longer need to be given a physical stamp. Like any other self-assessed tax, but unlike stamp duty, HM Revenue & Customs is able to enquire into an SDLT return and raise assessments to recover unpaid SDLT.

Whether or not tax is payable Her Majesty's Revenue and Customs require a Return to be received by them within four weeks of the transaction completion. Failing which, they have power to levy a fine on the tax payer - the fine is not for failure to pay the tax but for failure to make the return.

When a return is accepted by HMRC they provide a Certificate without which it is impossible to register a change in the land ownership.

Stamp duty for Residential land purchases

The amount of stamp duty for residential land purchases depends on several key factors: what status of buyer you are e.g. first time, property type e.g. New build home, economic area and lastly the value of the property. It works on a percentage basis where the percentage payable applies to the whole of the purchase price.

For example, a house priced at £250,000 would attract an SDLT of £2,500, but one of £250,001 would be liable to SDLT of £7,500.

One result of this banding is that it has a distorting effect on the market, because a house is very difficult to sell at prices just above each threshold, for example, £255,000.

Today, there is no stamp duty payable on properties up to £125,000.  It is charged at 1% on houses costing between £175,001 and £250,000, 3% on those worth from £250,000 to £500,000 and 4% for those sold for more than £500,000. Note that if you are a First Time Buyer (FTB), from the Budget of 2010, FTBs are not required to pay Stamp Duty on properties up to £250,000.  This is set to end in 2012. 

From April 2011, properties being sold for over £1,000,000 will incur an increased SDLT of 5% (currently 4%). 

In London, the average asking price for a home is £402,000, which would mean stamp duty of more than £12,000.

Here is a link to MoneySavingExpert's simple Stamp Duty Calculator

Last updated:  30th March 2010