Stamp Duty & First Time Buyers – The Facts

An introduction to Stamp Duty Land Tax for first time buyers

It was announced  in Budget 2017 that first time buyers would potentially qualify for relief from Stamp Duty Land Tax (SDLT). Budget 2018 extended the relief further.

How much stamp duty relief for first time buyers?

First time buyers who qualify for the relief will not have to pay any SDLT on the first £300k of chargeable consideration.

As such, where the property is purchased for less than this amount and the buyer qualifies for the relief then he or she will not pay a penny of tax.

Where the price is between £300k – £500k then they pay 5% on the amount in excess of £300,000.

However, if the purchase price exceeds £500,000 then the full rates of SDLT will apply without any relief.

Summary of stamp duty tates for first time buyers

What defines a ‘first time buyer’?

A first-time buyer is:

• an individual;
• has never acquired a major interest in a dwelling in the UK / elsewhere; and
• must intend to live in the property as their only / main residence

As such, a limited company or a limited liability partnership (LLP) cannot benefit from the relief.

If a property is acquired under a bare trust, then the tests above are applied to the beneficial owner / trustee.

Joint Purchasers

The relief  will only apply where each of the buyers qualifies as a first-time buyer.

If, for example, there are two purchasers and one of them has previously bought a property anywherethen the relief will not apply. This is despite the fact that the other buyer has not purchased a property previously and might qualify as a first time buyer in their own right.

Shared Ownership

Shared ownership buyers will have a choice when it comes to how and when they pay their SDLT liability:

• Option 1: pay SDLT on the share of the property they are purchasing uprfront. The will then pay further sums when their level of ownership reaches over 80% ownership;
• Option 2: they can elect to pay SDLT all in one go on the market value of the property. Here, there would be no need for further payments.

Where a person is purchasing a share in a property worth over £500k then this will not qualify for the relief at all. They will pay SDLT in full. This is the case even if the share being purchased is below £500k.

If you have any queries regarding stamp duty for first time buyers, or stamp duty in general, then please get in touch