Stamp duty originated in the 17th century when duty stamps could be purchased and attached to a transactional document to prove that any tax due on the transaction had been paid. Today, tax relating to the purchase of land is known as “Stamp Duty”, or, more correctly Stamp Duty Land Tax (SDLT) for property.
There has in the past been some confusion as to whether the rate bands are applied once on the whole amount or incremental, ie escalating rates on successive portions. The latter is the case, and for the sake of clarity the following is the current banding table for most residential properties in England, Wales and Northern Ireland:
A property costing up to £125,000 – nil
The portion of the purchase price between £125,000 and £250,000 – 2% (up to £2,500)
Plus the portion of the purchase price between £250,000 and £925,000 – 5% (up to £33,750)
Plus the portion of the purchase price between £925,000 and £1.5m – 10% (up to £57,500)
Plus the portion of the purchase price over £1.5m – 12%
Please note that if you are buying an investment property or second home, an additional 3% SDLT on the purchase price must also be applied to any purchase.
Firs time buyers are exempt from SDLT on purchases up to £300,000, and they pay 5% on any portion of a purchase between £300,001 and £500,000.
So buyers of a property costing eg £375,000 would pay £8,750 (£0+£2,500+£6,250). You can find an SDLT calculator at http://www.hmrc.gov.uk/tools/sdlt/land-and-property.htm
The above will cover most situations, but there are certain exceptions and reliefs, so it’s worth taking professional advice in relation to your own specific situation.