A History of Stamp Duty

 
Categories: Buying Property Fees Guest Post Information

stamp duty

Stamp Duty’s always been a controversial topic. With the threshold inevitably pulling more people into the net as inflation soars, it seems as if these days everyone with a suburban semi in an affluentish area is being forced to pay the tax. However, Stamp Duty didn’t start out like this. Originally introduced as a levy on ‘vellum, parchment and paper’ (hence the name of the tax), it’s been expanded to include many other goods since.

Let’s have a look back at how Stamp Duty has changed over the years. Thanks to Paramount Properties for giving us some background help with this issue…

The origins

Stamp Duty emerged in 1694 during the reign of William and Mary. It was originally only meant to be around for four years and was introduced during the war against France. However, evidently that never happened (sigh) as unsurprisingly it proved a pretty good revenue earner for the powers that be. In the 18th and 19th centuries, the tax was extended from paperwork, to include newspapers, insurance policies, gold and silver plate and hilariously hair powder!

American War of Independence

The attempt to enforce the Stamp Duty Act in 1765 in the English colonies in America led to outcry against the tax of: “No taxation without representation.” The uproar contributed to the start of the American War of Independence. Up until 1793, the tax was imposed as a fixed quantity. However, the tax was extended to include property sales relative to their value in 1808 and one could argue it all rapidly went downhill from there…

Modern History

Here’s a look at some of the thresholds for Stamp Duty in recent history and how they’ve changed (gulp):

-In 1984 Nigel Lawson, the Conservative Chancellor increased the threshold from £25,000 to £30,000.

-In 1991 there was a bad property recession. The Conservatives decided to suspend the levy on homes worth less than a quarter of a million for a nine month period.

-1997 and…New Labour’s in power under Tony “Third Way” Blair. His Chancellor, Gordon Brown, introduced two new bands at £250,000 and £500,000; at 1.5 and 2 per cent respectively.  Three years later he tweaked the bands to 3 and 4 per cent; massively increasing annual tax take in the first decade of their government. However, in 2005, the threshold was raised from £60,000 to £120,000.

– A year later, the threshold was raised by five thousand pounds to £125,000 and in 2008 there was an increased threshold of £175,000 for a year.

-Just three years ago there was a two year holiday from the levy for first time buyers for property worth £250,000 and below. At the top end, properties worth more than a million got hit with a five per cent rate.

The problems

The main issue with Stamp Duty is that it doesn’t work on a sliding scale. With income tax, you only pay extra on the amount that you earn over the different thresholds; whereas with Stamp Duty you pay the rate on the full amount.

Currently the TaxPayers’ Alliance plus other institutions are campaigning for the reform of the tax. It is, however, unlikely the government will have any time for this during a period when revenue is supposedly thin on the ground. Also, with a Mansion Tax likely to be introduced after 2015, it’s  looking increasingly unlikely that there will be any appetite for reform while populist soak-the-rich policies garner votes in a time when political parties need all they can get.

 

 

Rachel ORiordan

Rachel ORiordan is mad about all things property and marketing related. You can find her writing on blogs like Addicted to Property or Mission Imblogable.

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