First-time Buyer Stamp Duty

When considering getting a First-time buyer mortgage, your deposit is not the only expense to worry about: You will also need to prepare for stamp duty, and Tax owed on property worth more than £300,000 in England and Northern Ireland for every first-time buyer, along with mortgage lender fees, cost of property valuation and legal expenses. You can pay the Land and Buildings Transaction Tax (LBTT) in Scotland instead of stamp duty, while in Wales, it is the Land Transaction Tax (LTT).

Who is classed as a first-time buyer?

A first-time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence.

What is stamp duty?

Stamp Duty is a tax you might have to pay if you buy a residential property or a piece of land in England and Northern Ireland.

If you’re buying your main property up until 30th of June 2021, you will not have to pay Stamp Duty on properties costing up to £500,000. This will apply whether you’re a first-time buyer or have previously owned a property.

Properties costing more than £500,000 will pay the Stamp Duty rate based on the value of the property over £500,000. If you’re buying a second home, you’ll still pay Stamp Duty on a property costing more than £40,000 at the revised rates – paying an extra 3%.

This tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage.

If you’re buying a property in Scotland, you will pay Land and Buildings Transaction Tax (LBTT) and in Wales Land Transaction Tax (LTT) instead of Stamp Duty.

[Add LINK TO Stamp duty calculator]

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Do you have to pay stamp duty as a first-time buyer?

From 22 November 2017 first-time buyers paying £300,000 or less for a residential property will pay no Stamp Duty Land Tax (SDLT).

First-time buyers paying between £300,000 and £500,000 (THIS FIGURE IS NOW £300,000 – £925,000 will pay SDLT at 5% on the amount of the purchase price in excess of £300,000, a reduction of £5,000 compared to the amount of SDLT they would have previously paid.

First-time buyers purchasing property for more than £500,000 will not be entitled to any relief and will pay SDLT at the normal rates. The relief must be claimed in an SDLT return.

If you are buying a property in London as a first-time buyer, you do not have to pay stamp duty up to and including a property value of £500,000.

Stamp Duty Land Tax/Land & Building Transaction Tax/Land Transaction Tax Exemption

On the 30th of June 2021, the temporary Land Tax holiday period ends. The calculator below reflects the appropriate Land Tax to be paid if your purchase completes after the 30th of June 2021. Should your purchase complete before this date then the Land Tax to be paid may be lower than that shown. L&C is not able to advise on tax matters and we recommend you take specialist advice on the stamp duty level which may be applicable to your circumstances.

From 1st April 2021 until and including 30th September 2021 you only pay stamp duty on the value of the property above £250,000 as the first £250,000 is stamp duty exempt.

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How is stamp duty calculated?

The amount of stamp duty varies from 0 percent to 12% above of the property purchase price. As with income tax, in a ‘levelled’ system, the rate is determined proportionately, meaning you can pay the rate for the proportion of the property that falls within that band.

The actual name of the tax and the rates applied to depend on where you are buying in the UK, whether you are a first-time buyer, and if not how many properties you currently own.

In England and Northern Ireland, it’s known as Stamp Duty Land Tax and is usually payable on purchases above £125,000, however from the 8th July 2020 through to the 30st June 2021 a Stamp Duty holiday applies meaning properties up to £500,000 are exempt, as long as the transaction completes by 30th of June 2021.

Wales’ equivalent is called the Land Transaction Tax, and usually applies to properties over £180,000, but this threshold will be temporarily increased to £250,000 from the 27th July 2020 until the end of March 2021. This doesn’t apply to anyone purchasing an additional property.

Scotland has the Land & Buildings Transaction Tax which normally applies to properties over £145,000 or £175,000 for first-time buyers. Until the 30th of June 2021, this threshold for all home-buyers has been increased to £250,000.

England, NI, and Wales impose a 3% surcharge for additional properties such as second homes or Buy to Let, this still applies to properties in England and NI which would otherwise be exempt due to the Stamp Duty Holiday. In Scotland, it’s charged at 4%.

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How much Stamp Duty do I need to pay?

There are several rate bands for Stamp Duty. The tax is calculated on the part of the property purchase price falling within each band. Use our Stamp Duty calculator [Add LINK TO Stamp duty calculator] to find out how much you’ll pay.

Stamp duty for first-time buyers:

From 8th July 2020 – 30th June 2021, stamp duty will not be paid on any properties priced at £500,000 or below. This means that first-time buyers purchasing a property under £500,000 will not have to pay any stamp duty tax.

This announcement has replaced the special rules that were in place for First Time Buyers from November 2017.

Tax bands for first-time buyers are as follows:

  • Property value SDLT rate
  • Up to £500,000 Zero
  • The next £425,000 (the value between £500,001 to £925,000) 5%
  • The next £575,000 (the value between £925,001 to £1.5 million) 10%
  • The remaining amount (the value above £1.5 million) 12%

Stamp Duty holiday: Do first-time buyers have to pay Stamp Duty from April 2021?

Stamp Duty Land Tax (SDLT) is a tax levied on properties in England and Northern Ireland, and currently, the Government has raised the threshold for Stamp Duty due to the pandemic. This means until June 30th, 2021, the Stamp Duty threshold for residential properties is £500,000. However, from April 1, 2021, the Stamp Duty threshold will change back to £125,000 for residential properties. No it now means from 1st April 2021 until 30th June 2021 it is free up until £500,000 and from 1st July 2021 until 30th September the first £250000 is stamp duty free.

The Stamp Duty holiday has incentivized many people to move home in recent months.

With the threshold raised to £500,000, people have been able to save up to £15,000 which previously would have been spent on Stamp Duty.

With only a few months left of the Stamp Duty holiday, many are urgently trying to complete their house purchases before the deadline.

The Government has faced significant pressure to extend the Stamp Duty holiday past the March June 31 deadline to 30th June 2021.

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When do I have to pay Stamp Duty?

You have 14 days to file a Stamp Duty Land Tax (SDLT) return and pay any SDLT due. If you don’t submit a return and pay the tax within 14 days, HMRC might charge you penalties and interest. The solicitor does this for you`1

How do I pay Stamp Duty?

Your solicitor will usually deal with the return of the Stamp Duty and any payment due to you, although you can do it yourself.

Either way, you’re accountable for making sure that everything is submitted on time. You still have to submit a return (unless exempt) if the price of your new home is less than £ 500,000, even though you won’t need to pay any Stamp Duty.

When the stamp duty holiday is over, what are stamp duty rates for first-time homebuyers?

The stamp duty holiday is valid on any property sales completed between 8 July 2020 and 30th of June. However, from 1 April 2021, first-time buyers will still be eligible for relief. You’ll pay less or no tax if both the following apply:

  • you, and anyone else you’re buying with, are both first-time buyers
  • the property you are buying is £500,000 or less

You will also only pay a reduced rate of 5% SDLT on any value between £500,001 to £925,000 as a first-time buyer if your property exceeds £500,000.

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When is Stamp Duty not payable?

There are other circumstances in which Stamp Duty is either not payable or can be reduced: Slightly over rate band. If the price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price. Transfer of property in separation or divorce. If you’re divorcing or separating from your spouse or partner, there’s no Stamp Duty to pay if you transfer a proportion of your home’s value to them, unless you get more of a mortgage or take over a mortgage that falls within the stamp duty liability. Your solicitor will confirm this for you. Transfer of deeds. If you transfer the deeds of your home to someone else – either as a gift or in your will – they won’t have to pay Stamp Duty on the market value of the property. However, if you exchange properties with another person, you will each have to pay Stamp Duty on the property you receive based on its market value.

How to pay stamp duty

You have 14 days from the completion date to file your stamp duty return and pay (previously the time limit was 30 days). If you don’t pay on time you could be fined. In most cases, the solicitor carrying out your conveyancing will pay the tax on your behalf at completion and add the amount to their fees. They will also claim any stamp duty relief you’re eligible for, such as relief for first-time buyers. However, it is your responsibility to ensure that the stamp duty is paid.

I want to buy with my partner, but I live elsewhere – are we eligible?

If you are aiming to live with your partner when you buy the property, you qualify. If both your names will be on the deeds, but you will not be living in the property, you cannot qualify.

I own commercial premises, but not a home. Am I a First Time Buyer?

If you own commercial property but not a dwelling, you are a First Time Buyer and are eligible.

I’m a First Time Buyer selling in Scotland and buying in England – do I qualify? What if I sell in England and buy in Scotland?

If you are selling in Scotland and buying in England, then you have previously owned property and cannot be eligible. If you are selling in England and buying in Scotland, you will not qualify for the Land and Buildings Transaction Tax (LBTT) exemption available in Scotland.

I inherited a place in France but have no property in England – do I qualify?

Inheriting property, even abroad, means you are not eligible. Also if you bought property abroad you cannot qualify either.

I sold a property 5 years ago and don’t own anything. Does that make me a First Time Buyer?

No, if you have owned a property before, even if you don’t own it now, you are not a First Time Buyer.

I’m a First Time Buyer, but my partner owns a Buy To Let property – are we eligible?

No, unless you are solely buying the property in your name. Both partners buying the property need to be First Time Buyers.

I’m a First Time Buyer – we’ve exchanged but not completed so do I still need to pay?

This comes into play when you have completed the sale, so if you exchanged but have not yet completed it, you will qualify for the Stamp Duty exemption.

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