Stamp duty was first levied in the UK in 1694 to pay for the war with France. Although initially only planned for four years, it proved such a good earner for the government that it was never repealed.

At first the tax covered “vellum, parchment and paper”, but this was extended during the 18th and 19th centuries to cover a range of goods, including newspapers, insurance policies, gold and silver plate and even hair powder. The tax was extended to property sales in 1808.

In 1765, the attempted enforcement of stamp duty in English colonies in America led to protestor’s demands of “no taxation without representation” – and ultimately to the Boston Tea Party and the outbreak of the American War of Independence.

In 1797, William Pitt the Younger described stamp duty as "easily raised, pressing little on any particular class, especially the lower orders of society, and producing a revenue safely and expeditiously collected at small expense." He virtually doubled the tax that year.

In 1984 the Tory Chancellor Nigel Lawson eased the pressure on homebuyers by increasing the threshold for stamp duty on property from £25,000 to £30,000 and reduced the highest rate of stamp duty from 2 per cent to 1 per cent.

In 1991, during the last housing recession, the Conservative government temporarily suspended stamp duty for nine months on all properties worth less than £250,000 in an effort to boost sales.

But during the housing boom of the late 1990s/ early 2000s, when many more houses became liable for stamp duty, Gordon Brown came under increasing pressure to adjust the thresholds accordingly. In 2000-01, the Inland Revenue received £2.145 billion from residential stamp duty; in 2002-03, it received £3.59 billion.

In his 2005 Budget, Brown finally increased the zero rate stamp duty threshold from £60,000 to £120,000, and increased it slightly again in 2006 to £125,000.

But campaigners such as the Council of Mortgage Lenders (CML) want further reform to the controversial tax. The CML says that stamp duty unfairly constrains first-time buyers, places a greater burden on the south of England and encourages “price bunching” just below the thresholds. It favours a graduated structure that only charges higher rates of duty on the proportion of the property value above the threshold.