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A guide to stamp duty for First-Time Buyers

View profile for Julia Gaunt
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A guide to stamp duty for First-Time Buyers

Stamp Duty is an important consideration for home-buyers, especially for first-time buyers; who may not be aware of stamp duty and how it affects them.

Conveyancing Solicitor Julia Gaunt provides a guide for First Time Buyers who may not know where they stand in regards to Stamp Duty.

What is stamp duty?

Stamp duty is a tax that is imposed on single property purchases or documents. Property purchases in which stamp duty is imposed, include:

  • Freehold property
  • New or existing leasehold
  • Shared ownership properties
  • And, the transfer of land or property in exchange for payment

Stamp duty is different if you live in Scotland or Wales. Scotland use the Land and Buildings Transaction Tax (LBTT), and Wales use the Land Transaction Tax (LTT).

Please refer to the links provided above for more information if you live in Scotland or Wales.

Do first-time buyers pay stamp duty?

This depends, if you are a first-time buyer purchasing a home that costs £300,000 or less; then no – you are exempt and will not pay stamp duty.

If you are purchasing a home which is priced higher than this threshold, you will only have to pay stamp duty on the value above £300,000 if the property is valued under £500,000.

If the property costs more than £500,000, then you will not be entitled to any relief and will pay SDLT at the normal rate.

This first-time buyer relief was first introduced in November 2017.

How much is stamp duty for first-time buyers?

For those who fall between the £300,000 and £500,000 bracket, you will pay stamp duty at 5% on the amount of the purchase price. This is £5,000 less than you would have usually paid if the first-time buyer relief was not in place.

Do I qualify for first-time buyer SDLT relief?

To be considered eligible you must be a first-time buyer, which means:

  • You never have owned an interest in a residential property in the UK or abroad
  • You intend to occupy the property as your main residence

If you tick these to boxes, then yes – you qualify!

What is stamp duty holiday?

A stamp duty holiday was first introduced in July 2020, to help buyers whose finances were affected by the coronavirus pandemic. The holiday essentially meant that homebuyers in England & Ireland wouldn’t have to pay any stamp duty tax on properties up to £500,000.

This holiday was great for first-time buyers, who benefited from the tax-free threshold of £500,000.

Has stamp duty holiday ended?

No, but stamp duty rates have changed.

What is the current stamp duty holiday threshold?

From 1st July 2021, the stamp duty holiday qualifying threshold changed. Homebuyers are now only exempt from paying stamp duty on property purchases less than £250,000 and have to pay the tax for purchases above that figure.

The new rates are as follows:

  • £0-£250,000 = 0%
  • £250,001-£925,000 = 5%
  • £925,001-£1,500,000 = 10%
  • £1,500,000+ = 12%

For first-time buyers, you’ll be pleased to know that you are still exempt from paying stamp duty on property purchase less that £300,000. Again, this is due to the first-time buyer SDLT relief.

The following stamp duty holiday rates may not be relevant to you as a first-time buyer, but I have provided them to make you aware. If not relevant to you, they may be to a family member or friend.

How is stamp duty changing in October?

From 1st October 2021, the stamp duty rates are returning to normal. This means that the point from which homebuyers start to pay stamp duty will return to £125,001. Below are the SDLT rates from October:

  • £0-£125,000 = 0%
  • £125,001-£250,000 = 2%
  • £250,001-£925,000 = 5%
  • £925,000-£1,500,000 = 10%
  • £1,500,000+ = 12%

Specialist First-Time Buyer Solicitors

If this article has raised any queries, please do not hesitate to get in touch with one of our expert Residential Property Solicitors. Please contact us on 01202 499255.

We offer all new clients a free initial chat with one of our bright, friendly lawyers over the phone or by video call.