The History of Stamp Duty Land Tax
Stamp Duty is political again – there are arguments to increase, target, decrease, and even abolish it altogether.
We thought it would be a good moment to look at why it exists and its modern implementation.
330 years old and it looks set to be in the news for a long time to come.
Jonathan Rolande
The NAPB
Stamp Duty Land Tax (SDLT) represents one of the major revenue sources for the UK government and has found its roots deep in the heart of the British tax system for centuries. Understanding its history provides insight into how tax has developed in the UK and the priorities and economic strategies of successive governments.
The Origins of Stamp Duty
Stamp duty was first introduced in England in 1694, during the reign of William and Mary. The tax was implemented to raise funds for the war against France. It was first levied on documents needed to sell land, properties, and other legal transactions. Stamp duty was based on a simple principle: documents would not be legally valid unless stamped, testifying to payment of the duty. The implementation was so successful that, although originally intended to last only for 4 years, the Stamp Duty Land Tax continues to this day, in one form or another.
Evolution in the 18th and 19th Centuries
Stamp duty grew exponentially from the 18th through the 19th centuries. The tax was then applied to an increasing number and variety of documents, like newspapers, pamphlets, or even mundane things like dice, hats, playing cards, gloves, patent medicines, perfumes, insurance policies, and gold and silver plates. All this was done to raise funds to finance different state activities, including military undertakings and public infrastructural expansions.
This was the period in which the Stamp Act of 1765 was introduced, a tax imposed on the American colonies as well. This tax began to rise and led to the start of the American War of Independence.
It was originally a fixed amount, but in 1808, stamp duty on transfers of land and shares became a tax on the proportionate value of the property being transferred.
20th Century Reforms
From ink-stained documents to electronic transactions, there were real reforms in the system of stamp duty in the UK during the 20th century. The groundwork for modern stamp duty changes was laid in 1891 when a land value tax was implemented, which later evolved into what is now known as the Stamp Duty Land Tax (SDLT).
The Finance Act of 1891 established a more systematic approach to stamp duty, while the Stamp Act of 1910 was another pivotal moment in stamp duty history.
The Birth of Modern SDLT
The modern incarnation of stamp duty, known as Stamp Duty Land Tax (SDLT), was introduced in December 2003, replacing the previous stamp duty on land and property transactions. SDLT was meant to achieve streamlined and more effective tax collection. One of the key changes was introducing a self-assessment system, where buyers are responsible for calculating and paying the tax.
Today, SDLT applies to residential homes and land purchased in England and Northern Ireland. If land or property is purchased, then the buyer has to submit a return to HMRC. Those who do not have to pay any stamp duty must also file a return, as not doing so can also lead to fines.
Normally, stamp duty land tax is paid within 4 weeks of the date a property is purchased. After this period, the buyer will have 14 days to pay the stamp duty. Homebuyers pay this either by themselves or through their solicitors. Either way, the money is sent directly to HMRC.
SDLT Thresholds
The threshold is where SDLT starts to apply. If you buy a property for less than the threshold, there’s no SDLT to pay.
The current SDLT thresholds are:
● £250,000 for residential properties
● £425,000 for first-time buyers buying a residential property worth £625,000 or less
● £150,000 for non-residential land and properties
Rates for a single property
You pay stamp duty at these rates if, after buying the property, it is the only residential property you own. You usually pay 3% on top of these rates if you own another residential property.
● 0% on properties worth up to £250,000
● 5% on properties worth between £250,001 – £925,001
● 10% on properties worth between £925,001 – £1,500,000
● 12% on properties worth over £1,500,001
SDLT Relief
You can claim a discount (relief) if the property you buy is your first home. It means you’ll pay:
● no SDLT up to £425,000
● 5% SDLT on the portion from £425,001 to £625,000
You’re eligible if you and anyone else you’re buying with are first-time buyers. You cannot claim the relief if the price is over £625,000.
*Rates and payable terms for illustration only. These are subject to change. We recommend getting advice from a qualified solicitor when considering SDLT rates.
