Stamp duty is a re-registration tax. That means you pay it whenever you buy (but not sell) a registered asset. The most common examples are property (the buyer’s name has to be recorded at the Land Registry) and shares (the relevant company share register has to be updated).
Originally, stamp duty was justified as the government’s way of recouping the cost of the re-registration of property. However, given that this all now takes place electronically, that logic has disappeared. The rates at which the tax is paid vary. On shares it is 0.5% of the purchase price.
On property the rate varies according to value. Up to £125,000 the rate is zero, up to £250,000 1%, up to £500,000 3%, up to £1m 4%, and more than £1m it’s 5%. Somewhat unfairly, it is paid on the whole amount – so the stamp duty on a property bought for £260,000 is £7,800 (£260,000 x 0.03). This needs to be paid before a legal title can be transferred from seller to buyer.