Stamp Duty

UK Stamp Duty rates & thresholds

Stamp duty is a form of tax which is charged on legal instruments such as deeds and licences. The tax is so named because it was a legal requirement for these documents to be impressed with an official stamp to make them legally valid.

Stamp Duty Land Tax

Most stamp duties in the UK were abolished in 2003 and the stamp duty which had previously been payable on land transactions was replaced with Stamp Duty Land Tax (“SDLT”) which is now the only stamp duty which is likely to be encountered by most people. This is not a true stamp tax, but is instead a tax charged on the transfer of land, linked to the value of the transaction.

Stamp duty is charged at the following rates on residential property

• 0% on properties up to the value of £125,000
• 1% on the value of properties between £125,001 and £250,000
• 3% on the value of properties between £250,001 and £500,000
• 4% on the value of properties between £500,001 and £1,000,000
• 5% on the value of properties £1,000,001 and over

In 2010 the Chancellor introduced a stamp duty exemption for first time buyers in an effort to boost the ailing housing market by increasing demand at the bottom. First time buyers were exempted from stamp duty on homes worth under £250,000.

Taxation of leases

SDLT applies to all land transactions, including leases. This means that where a long term commercial lease is purchased for more than a certain amount, SDLT is payable on the transaction at the same rates as on purchases of land.

Zero carbon

As with many taxes, the government plans to use stamp duty as a “green tax” to try and encourage environmentally friendly behaviour. The government’s ambition is to make all new homes “zero carbon” by 2016 and, to encourage this, the chancellor is due to exempt all zero carbon homes up to the value of £500,000 from stamp duty. It is expected that this exemption will remain in place until at least 2010.