In November 2017, the Treasury announced that all first-time buyers will be exempt from stamp duty on the first £300 000 of a residential property.
As a Solicitor with a background of New Build properties, both affordable homes and outright purchases, the cut in stamp duty is welcome news for my first time buyer clients.
If you are a first time buyer looking to get onto the property market, then this is the best time to do so. With most of the first time buyers that I have assisted over the years, stamp duty has been an additional burden to consider for them. Stamp duty puts insurmountable pressure on the vast majority of would-be first-time buyers who could not afford to save for deposits, let alone stump up further costs in stamp duty. The stamp duty reform has now encouraged more buyers to purchase homes that actually suit their needs.
What is Stamp Duty?
Stamp Duty is a lump-sum tax that you will have to pay when you buy a residential property. The amount payable depends on the price of the property. The percentage of tax that is applied is summarised in the table below.
Am I 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 intend to occupy the property as their main residence.
With the new stamp duty relief, if you are a first-time buyer purchasing your first home for up to £300,000 you will not pay any Stamp Duty Land Tax (SDLT)! First-time buyers wanting to purchase a property up to £500,000 will not pay stamp duty on the first £300,000 and will pay at a rate of 5% from £300,000-£500,000.
|Portion of consideration||Standard Rates||Rate for First Time Buyers|
|Up to £125,000||0%||0%|
|Over £125,000 and up to £250,000||2%||0%|
|Over £250,000 and up to £300,000||5%||0%|
|Over £300,000 and up to £500,000||5%||5%|
For example, if you are purchasing a freehold property for £180,000 you would have had to pay £1,100 in Stamp Duty Land Tax under the old rules. Now you pay £0. Similarly, if you were purchasing a freehold property for £320,000 you would have previously had to pay £6,000 in Stamp Duty Land Tax. You now pay £1,000 (calculated as 5% of the remaining £20,000). Thus, a reduction of £5,000 compared to the amount you would have previously had to pay.
This will cut stamp duty for around 80% of all first time buyers. However, 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.
This immediate cut in stamp duty will help reduce the upfront cost of buying your first home, and ease the pressure of saving for a deposit, by removing the extra demand of paying SDLT.
This handy Stamp Duty Calculator will tell you how much you will have to pay: https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro