What is stamp duty and why do we have to pay it?

There are two things that are said to be certain in this world, death and taxes.

Stamp duty is one of those taxes…

Where did it come from and why do we have to pay it? During the purchasing process of a property, stamp duty can be a major cost, it’s definitely something you should be aware of.

Stamp duty or Stamp Duty Land Tax (SDLT) is a tax you pay to HMRC when you buy a property in England or Northern Ireland.

It’s paid by the purchaser and the amount depends on the property price. If the property or land is in Scotland or Wales, stamp duty is called:

Let’s go through a little history lesson. Stamp duty was first introduced in 1694 during the reign of William and Mary. It was a temporary transaction tax to raise money for the war against France. It proved to be such a successful method in raising finances for the government that it still exists today, hooray… 😒

A “stamp” was used on documents for proof of payment of this tax. It was applied to many goods other than lands such as newspapers, cheques and playing cards. Originally, it was a fixed-rate tax up until the 19th century, where how much the land was bought and sold for determined the amount to be paid.

The bands and rates for properties in Scotland and in Wales differ to England and Northern Ireland. How much you pay depends on whether the land or property is residential use or non-residential or mixed-use.

If you are buying a residential property there are different rates of SDLT if:

If you’re a first-time buyer in England or NI, you don’t need to pay stamp duty on properties worth up to £300,000. In Scotland, first-time buyer relief is £175,000. Wales does not have first-time buyer relief.

If you don’t own a property and you buy property tokens on Proptee, don’t worry, it will not affect your first-time buyer discount.

At Proptee we’re buying properties via a company where the stamp duty rate charged is that for additional properties.

Stamp Duty Reserve Tax (SDRT) is a tax that is charged on agreements to transfer existing securities. SDRT is generally calculated as 0.5% of the sale price, as long as it’s greater than £1000.

So if you were to buy a company that owns multiple properties you would pay SDRT for the transaction and not SDLT.

Have a go at this stamp duty calculator and see what your dream property’s SDLT would be. And yeah, prepare yourself!

Join our discord to talk to the Proptee team and our amazing community. This is also where we will be giving people the chance to participate in the private beta of the Proptee app.

See you next week.

-Saad ✌🏾