Stamp Duty

Intermediate

Stamp duty is a tax charged on certain legal documents and transactions, most often on buying property or shares. The name comes from the official stamp that was once applied to documents to show the tax had been paid.

Stamp duty is used in the United Kingdom, Australia, India, Hong Kong, Singapore and several other countries, with different rules in each. Today the tax is usually paid electronically, but the old name has remained.

In property purchases, stamp duty is typically charged on the price, often in bands with rising rates, and paid by the buyer. Some systems charge extra for second homes or for foreign buyers, and give relief to first-time buyers.

For example, under a simple flat rate of 2%, a buyer of a 300,000 property would pay 6,000 in stamp duty, on top of the price.

Some countries also charge stamp duty on share purchases. In the United Kingdom, a stamp duty reserve tax applies to purchases of shares in UK companies. In England and Northern Ireland, the property version is called Stamp Duty Land Tax, while Scotland and Wales have their own equivalent taxes.

Because stamp duty adds to the upfront cost of buying, it can discourage people from moving home, and its effects on the housing market are often debated.

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