The HMRC Stamp Duty | How much is stamp duty when buying my home?

Definition

This represents an amount that you have to pay the government when you buy a property.

This article covers all you need to know regarding stamp duty in the United Kingdom.  In this article we shall focus on residential stamp duty.  This is based on the fact that stamp duty rates differ for residential and non – residential property.  Furthermore, this also depends on the economic status of the area

Disadvantaged areas

In respect of residential and non – residential:

  • Properties under £150K are stamp duty free
  • Properties over £150K to over £500K range from 1% to 5%

So let us have a look at the price range and see what their respective stamp duty is in a typical residential setting:

Stamp Duty Price Brackets

Up to £125,000.00 0%
£125,001 – £250,000 1%
£250,001 – £500,000 3%
£500,001 – £1000,000 4%
£1000,001 – £2000,000 5%
£2000,000 or more 7%

 

The following video provides a basic understanding regarding stamp duty – typically referred to as Stamp Duty Land Tax (SDLT)

 

 

The videos provide a good insight on the issue of stamp duty.

 

 

Note

Following the Budget a new stamp duty rate has been introduced for the most expensive homes. From 21st March 2012 the new stamp duty rate of 7% will be applied to the sale price of a house if the figure exceeds £2 Million pounds.

Stamp duty rates for first time buyers.

Concessionary stamp duty rates were introduced for first time buyers for a period of two years from April 2010. This meant first time buyers wouldn't have to pay stamp duty on any house purchased up to the value of £250,000.

This concessionary stamp duty rate replaced the normal 1% and 3% stamp duty rates and applied to first time buyers only. The First time buyer stamp duty rates were valid until 24th March 2012.

 

Stamp Duty Calculator

Thus in the event that you decide that you want to purchase your own property please follow this link to determine how much it would cost you in stamp duty fees  – when perhaps purchasing your property:

Stamp Duty Calculator

Stamp duty clearly remains a controversial issue- another form of tax which many see as unfair, unnecessary and a stealth mechanism by the government to take even more of our money; this time on UK land transactions.

 

 

 

 

 

 

 

 

 

 

 

 

 

History of UK stamp duties

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”. Similar duties had been levied in the Netherlands. Stamp duty was so successful that it continues to this day through a series of Stamp Acts.

During the 18th and early 19th centuries, stamp duties were extended to cover newspapers, pamphlets, lottery tickets, apprentices' indentures, advertisements, playing cards, dice, hats, gloves, patent medicines, perfumes, insurance policies, gold and silver plate, hair powder and armorial bearings.

The attempted enforcement of the Stamp Act 1765 in the English colonies in America led to the outcry of no taxation without representation. The argument over stamp duty was a contributing factor to the outbreak of the American War of Independence.

Until 1793 stamp duty was always imposed as a fixed amount regardless of the size of the transaction. In 1808 stamp duty on conveyances of sale, including transfers of land and shares, became an ad valorem tax.

Historically, stamp taxes were administered by the Board of Stamps. This merged with the Board of Taxes in 1833/1834, and the Board of Inland Revenue was created under the Inland Revenue Board Act 1849 by merger of the Board of Excise and Board of Stamps and Taxes. Stamp taxes were then administered by the Inland Revenue Stamp Taxes business stream (formerly the Stamp Office). Another merger occurred in 2004, with the Inland Revenue and HM Customs & Excise to form HM Revenue & Customs which now itself manages stamp duty.

The Stamp Duties Management Act 1891 and the Stamp Act 1891 still contain much of the operative law on stamp duties, although there have been significant amendments subsequently and a partial consolidation was made in Finance Act 1999. The Stamp Act 1891 was the inspiration for many of the older Australian stamp duty Acts.

Stamp duty reserve tax

Aside from an exemption for ‘qualifying intermediaries' such as market makers at large banks, Stamp Duty Reserve Tax (SDRT) was introduced under the Finance Act 1986 to ensure that a form of tax equivalent to stamp duty would continue to be payable on the transfer of uncertificated shares. At that time, it was expected that the TAURUS share trading system would come into operation. In the event, SDRT was adapted for the change to trading in uncertificated shares in CREST, and is charged on agreements to transfer shares and other securities. SDRT is not a stamp tax, but a self-assessed transfer tax which is usually collected automatically by stock market participants (such as brokers) when a transaction takes place.

Stamp duty remains in force for shares and securities that are held in certificated form which can only be transferred by using a physical stock transfer form, and runs in parallel to SDRT on agreements to transfer shares. Since 1986, both stamp duty and SDRT have been charged at a rate of 0.5% of the consideration for the transfer of shares (in the case of stamp duty, rounded up to the nearest £5). The same transaction may include an agreement to transfer shares which may trigger a liability to SDRT, and the agreement may later be completed by a transfer of the shares which is liable to stamp duty. Provided that the transfer is stamped within 6 years, the charge to SDRT is cancelled to avoid a double charge. Stamp duty on repurchases of shares with a value of less than £1000 was abolished from 13 March 2008.

A higher rate of SDRT at 1.5% is charged for the issue or transfer of shares to a person who operates a depositary receipt scheme or a clearance service (other than CREST, which is exempted). The higher charge compensates for the fact that later transfers of depositary interests or through the clearance services will not attract SDRT. This type of SDRT is by nature paid almost exclusively by offshore (i.e. non-UK) investors, primarily US fund managers and amounts to approx. 25% of the total SDRT collected annually.

A unique feature of SDRT, compared to other purely domestic taxes in the United Kingdom, is that more than 40% of the annual intake is collected from outside the UK, thus creating an annual inflow of approx. £1.5 billion pounds from foreign investors to the UK government.

 


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