Do you pay stamp duty as a first-time buyer?
5 August 2022
Buying your first home is an exciting and interesting process. There are plenty of new concepts to understand, and it’s essential to be aware of how much you’ll need to pay. One of the critical fees you’ll need to consider as a first-time buyer is stamp duty.
This article will provide all the information that first-time buyers need to know about Stamp Duty Land Tax. How much you’ll pay will be determined by your buyer status, the property’s purchase price and various other factors. To help you budget for your first home, we’ll outline the stamp duty rules for first-time buyers.
What is Stamp Duty Land Tax?
Stamp Duty Land Tax (SDLT) is a government tax charged on properties in England and Northern Ireland. The amount of tax you’ll pay depends on the purchase price of the property you’re buying.
The current rates for typical buyers are calculated as follows:
Property price Current standard rates
Up to £125,000 0%
Over £125,000 and up to £250,000 2%
Over £250,000 and up to £300,000 5%
Over £300,000 and up to £500,000 5%
Why was stamp duty introduced?
Stamp duty was introduced as a way to raise revenue for the government. It’s been in place since 1694 and has since undergone several alterations.
The current system was introduced in 2003. The amount of tax paid by typical property owners is based on ‘bands’ such as those described above, rather than a flat rate. The system changed to make it more progressive so that people buying more expensive homes contribute more tax.
First-time buyer stamp duty rates
In 2017, the UK government introduced a stamp duty relief for first-time buyers. This granted exemption from paying stamp duty on properties priced up to £300,000. Throughout the pandemic, alterations to stamp duty discounts were made to account for reduced activity in the property market. As of July 2021, the stamp duty rates for first-time buyers have been restored.
The figures below demonstrate the current stamp duty rates for first-time buyers:
|Property Price||Rate for first-time buyers|
|Up to £125,000||0%|
|Over £125,000 and up to £250,000||0%|
|Over £250,000 and up to £300,000||0%|
|Over £300,000 and up to £500,000||5%|
For properties priced above £300,000, no stamp duty is paid up to this amount. 5% SDLT is then settled on the remaining portion of the property price up to £500,000.
Following these calculations, a property purchased at £350,000 would not be charged SDLT on the initial £300,000. A 5% charge on the additional £50,000 would create a charge of £2,500.
Any property priced over £500,000 is no longer eligible for any stamp duty relief, and buyers must pay standard rates of SDLT.
Why does the stamp duty relief for first-time buyers exist?
The government changed the stamp-duty rules for first-time buyers to make the property market more accessible. As you may already know, gathering the finances to apply for mortgages, fund deposits, and pay conveyancing fees can be overwhelming.
Existing property owners are fortunate to have invested equity within their property. These funds are often used to cover the costs of purchasing a new home. First-time buyers are often renters or don’t always have equity such as this that they can rely on.
Who is eligible?
The stamp duty relief as outlined above is reserved for first-time buyers only. The government provides strict guidelines on who classifies as a ‘first-time buyer.’ You may be surprised to know that you’re not eligible if you’ve previously owned a property in the UK or anywhere else in the world, even if you didn’t perform the purchase. This includes any property that was once gifted or inherited.
The stamp duty exemption is also only valid for properties purchased as your main residence. Even if you are a first-time buyer, purchasing buy-to-let or holiday homes is subject to standard stamp duty rates.
What additional help is there for first-time buyers?
Along with stamp duty relief, the UK government offers various schemes to assist first-time buyers in getting on the property ladder. Help to Buy ISAs and Lifetime ISAs have been two
of the most popular savings schemes. You may also be eligible for the Help to Buy Equity Loan scheme, which allows you to purchase a property with just a 5% deposit.
Stamp duty is just one of the many costs of purchasing a property. However, as a first-time buyer, you may be surprised to find plenty of help and support available to you. Be sure to research all of the options open to you before making your final decision on purchasing a property.
Expert support and conveyancing services for first-time buyers
Buying your first home can be a challenging and confusing process. We’ve discussed within this article that first-time buyers only pay stamp duty after a certain threshold. Up to this point, the first-time buyer relief offers a stamp duty exemption.
Redkite Solicitors want to offer a helping hand to make your first purchase smooth and straightforward. Our expert solicitors can provide specialist advice on various topics, from stamp duty land tax to the conveyancing process. If you’re searching for considerate and knowledgeable solicitors, contact Redkite Solicitors today.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.