...what's it all about?
Stamp duty
What's it all about?

Stamp duty was first introduced in England in 1694, during the reign of William and Mary under "An act for granting to Their Majesties several duties on Vellum, Parchment and Paper for 4 years, towards carrying on the war against France".  It proved such a good earner for the government that it was never repealed.
It has enjoyed a colourful history over the centuries with the attempted enforcement of the Stamp Act 1765 in the English colonies in America leading to the outcry of no taxation without representation and the ensuing Boston Tea Party which led to the American War of Independence.

In 1797, William Pitt the Younger described stamp duty as "easily raised, pressing little on any particular class, especially the lower orders of society, and producing a revenue safely and expeditiously collected at small expense." He virtually doubled the tax that year. It was eventually extended to property sales in 1808 and continues to this day in the form of a stamp duty land tax.

How stamp duty works

Today, stamp duty is a percentage paid on the purchase of a home or non-residential property, graded into bands.

The bands for the tax year 2010/2011 are:

Up to £125,000 =  zero

£125,000 to £250,000 = 1% (zero for first time buyers),

£250,000 to £500,000 = 3%,

£500,000 to £1,000,000 = 4%,

over £1,000,000 = 5%.

Stamp duty is paid on the whole value of a property, so if you buy a property costing £251,000, you would pay £7,530 not just the amount over the threshold as you would do with income tax.

Thanks to the current threshold of £250,000, the numbers of first time buyers having to pay stamp duty is relatively low but this will change in March 2012 when this threshold is scheduled to disappear.

If you have any questions about stamp duty or any other aspect of property buying and selling, ESPC property experts are the people to ask. Free Ask the Experts consultations are available in the ESPC showroom, 85 George Street, Edinburgh each Monday, Wednesday and Friday from 12 noon to 2pm, Saturday 10am to 5pm and Sunday 10am to 3pm. No need for an appointment. Just drop in.