If you’re looking to buy a new property, you might be faced with Stamp Duty Land Tax (SDLT), better known simply as Stamp Duty in England and Northern Ireland. Scotland and Wales have their own specified tax rules that work similarly. Stamp Duty is a government tax charged upon buyers when purchasing a piece of land or residential property. But where did it originate?
It turns out, Stamp Duty and similar tax requirements are implemented worldwide. Learn who introduced Stamp Duty, how it works and the difference between new and old versions of the tax below.
History Of Stamp Duty
Stamp Duty is believed to have originated in Venice in 1604 which was then reinvented by the Spanish in the 1610s. Eventually, Stamp Duty made its way to England on 28th June 1694 during the reign of William III and Mary II to help fund the war with France. It originally imposed a tax on a range of documents including cheques, property and land transactions, receipts and more. In order for these legal documents to be effective, people had to attach a physical revenue stamp to show Stamp Duty had been paid.
Stamp Duty at this time was pretty successful and led to an increase in the crown’s treasure. Although Stamp Duty has been around for centuries now, the scope of the tax has shifted dramatically which eventually resulted in the new type of land transfer tax in 2003.
More from Finance
- What Is An Underwriting Workbench?
- Breaking Barriers: Women in the World of Online Trading
- Global Markets Unleash Advanced Trading Tools to Navigate Uncertain Times
- Gold, Bitcoin, and the Dollar – A GARCH Volatility Analysis
- How Do Chargebacks Work in The UK?
- Fintech and Data Synergy For UK SMEs
- Payments in the Digital Age: Evolution and Change in the iGaming Industry
- Unpacking the Rise of Novice Traders on Online Trading Platforms
What Is The Difference Between The New And Old Stamp Duty?
Stamp Duty Land Tax as it is now known was officially introduced in 2003, replacing the old version as a type of transfer tax. Unlike the old Stamp Duty which was based on transactions only and could be run through a Stamp Duty calculator to see the price, the new version is a self-assessment tax where the buyer submits the appropriate form to HMRC.
The charge for SDLT is mainly based on the value of the property and other lesser-known factors which can often make the process difficult and confusing. This can also lead many buyers to overpay the amount of Stamp Duty they owe in order to avoid fraud consequences.
How Does Stamp Duty Work?
When buying a property in England or Northern Ireland, HMRC will require an SDLT assessment within four weeks of the completed transaction. Failing to do so could result in a fine, so getting your SDLT assessment sorted out as soon as possible is crucial. After submitting your assessment, you’ll have fourteen days to pay the SDLT amount. HMRC should then give you a certificate which allows buyers to officially register a change in land ownership.
The amount you will be required to pay can vary on a case-by-case basis depending on the cost of the property/land, whether you’re a first-time buyer, when you bought it, and whether you are eligible for reliefs or exemptions. It is however typically calculated as a percentage of the whole property’s value. So, the more expensive your property, the more Stamp Duty Land Tax you will likely end up paying.
Importantly, Stamp Duty is also payable for commercial properties and as well as for residential properties and premises (source: Magni Finance). This tax is often overlooked by people when they purchase a property, but it is important not to be forgotten as it will likely be many thousands of pounds.
Stamp Duty Rebates Explained
There are situations where you may find yourself eligible for a Stamp Duty rebate. For example, if a property was left to you in a will, you won’t need to pay Stamp Duty Land Tax. Alternatively, if the property acts as a holiday lodge or is considered a moveable property, it does not qualify for SDLT. Therefore, if you find yourself having paid SDLT without needing to, you can file for a Stamp Duty rebate from HMRC to receive a full or partial refund.