How Stamp Duty Evolved Over the Years in the UK
Legal instruments or written documents in the UK require physical stamps to make them valid. These stamps are widely popular as stamp duty. Stamp duty in the UK first started way back on 28th June 1694. William III first introduced stamp duty in England. Since then, it has gone through various changes and modifications.
Rise of stamp duty in the 18th and 19th century
Stamp duty in the UK became popular in the 18th and 19th century. During that time, stamp duties covered almost everything, such as lottery tickets, patent medicines, advertisements, pamphlets, newspapers, insurance policies, perfumes, armorial bearings, and hair powder. There was an uprising in 1765 from the British colonies in America that led the movement of “no taxation without representation.”
Items subject to stamp duty
The Stamps Act of 1694 in the UK continued even in the 18th century. People had to pay stamp duty on various items, such as:
• Dice – from 1711 to 1862
• Advertisements – 1712 to 1853
• Playing cards – 1711 to 1960
• Newspapers – 1712 to 1855
• Almanacks – 1711 to 1834
Stamp duty fast became one of the leading sources of revenue during that time. This enabled the government to levy stamp duty on several other items like:
• Hair powder – 1786 to 1800
• Paper – 1795
• Gold and silver plate – 1783 to 1890
• Patient medicines – 1783 – 1941
• Cosmetics and perfumes – 1786 to 1800
• Mittens and gloves – 1785 to 1794
• Hats – 1784 to 1811
Although stamp duty in the UK was popular in the 17th, 18th, and 19th century, it doesn’t have too much scope these days. People only use stamp duties on securities and shares, bearer instruments, and a few partnership-related transactions. Stamp duty almost became obsolete in the UK after 1st December 2003.
A new law called Stamp duty land tax became prevalent from 1st December 2003. It was a modified version of stamp duty used primarily for land transactions. Another law was introduced called Stamp duty reserve tax. It involved uncertificated shares and various other securities and bonds. The aim was to move towards paperless transactions instead of traditional stamp duties.
The Stamp duty land tax, applicable on land transactions, again got modified on 1st April 2015. It became the Land and Buildings Transaction Tax. However, it again got replaced on 1st April 2018 by Land Transaction Tax.
Stamp duty, nowadays, only prevails in the shares and securities industry. You need to have all your documents in a certificated form with correct stamp duty if you wish to transfer physical stock. Users of stamp duty have to pay 0.5% of their share transfer amount. £5 is the maximum stamp duty that you can pay if you transfer physical stock to a regular person.
Interestingly, people may have to pay a 1.5% stamp duty if they want to transfer shares to another person operating a depository receipt scheme. The government believes that the higher charge compensates for the late charges, if any, during the transaction.