Stamp duty land tax (SDLT) is paid on any property purchase of more than £125,000.
Stamp duty was introduced in England in 1694 during the reign of William and Mary as a transaction tax to raise money for war against France and was raised on goods including hats, newspapers and patent medicines.
Although it has been adopted in many countries around the world, an attempt to enforce the levy in the then British colonies in America contributed to the outbreak of the American War of Independence under the slogan “no taxation without representation”.
How stamp duty has changed over the decades
Home buyers paid one per cent tax on properties costing more than £60,000 until 1997 when then-Chancellor Gordon Brown introduced bands above which higher payments would be charged – the upper band was set at £500,000.
In the intervening two decades, the lower and upper thresholds have been raised in response to rapidly rising house prices.
But the biggest shock to the London property market from SDLT – now payable only on land and property transactions – came in December 2014 when George Osborne abolished the slab structure, introducing progressive charges and increasing the levy on homes costing more than £937,000.
|Price of property||Stamp duty payable|
|Up to £125,000||Zero|
|The portion from £125,001 to £250,000||2%|
|The portion from £250,001 to £925,000||5%|
|The portion from £925,001 to £1.5 million||10%|
|Anything above £1.5 million||12%|
Stamp duty and the London property market
While the government says 98 per cent of home buyers now pay less stamp duty than in the past, soaring London house prices have seen receipts from the capital increase disproportionately to the rest of the country.
The new bands have been blamed for the slowdown of the property market in the multi-million pound price bracket.
In 2015/16, seven per cent of all UK residential SDLT receipts came from Kensington and Chelsea, where the average payment was £135,000 and 30 per cent of all revenues came from the 10 highest paying local authorities, nine of them in London and the tenth in Surrey.
An additional three per cent charge for any property not used as a primary residence has been charged since April 2016 to help towards doubling the affordable housing budget.