Stamp Duty’s Purpose

Stamp duty was originally a form of tax charged on written documents. It required a physical stamp to be attached to or impressed upon the document in question. The more modern version does not require a physical stamp.

On December 1, 2003 the Stamp Duty Land Tax (SDLT), a new transfer tax derived from stamp duty, was introduced for land transactions.

For the most part, it replaced stamp duty for everyday transactions in land, such as those including a residential house. The only change from stamp duty is that a tax return is required to be made to the HM Revenue and Customs. Also, documents no longer need to be given a physical stamp.

The stamp duty land tax works on a \"slab\" technique. For example, the following prices of residential house purchases in pounds would carry the corresponding tax value:

125,000 or less 0%

125,000 to 250,000 1%

250,000 to 500,000 3%

500,000 to 1,000,000 4%

The tax figures give somewhat of a distorted view of what is a fair tax amount and what is not fair. 

Houses just above cash tiered amount, 255,000 pounds for example, are harder to sell. In the 2010 budget, stamp duty was abolished on homes under 250,000 for first time buyers, and for properties over 1,000,000 pounds, a new 5% rate tax was added. This helped even out the playing field.

SDLT is also applied on leased property. The same rate is utilized as compared with a land purchase. Also, SDLT is charged on rent under the lease at the rate of 1% of the net present value of rent over the entire term of the lease.

SDLT is also charged on certain types of land transfers.

These taxes must be kept in mind when considering things like renting property, buying property or remortgaging a house.

SDLT is a necessary part of any land or property purchase or rental agreement and must be figured into the budget of any property consideration. If you have questions about SDLT or remortgage of a home, see a specialist today.