Table of Contents
- Stamp duty for first-time buyers
- Do first-time buyers pay stamp duty?
- How much is stamp duty for first-time buyers?
- First-time buyer stamp duty rates in England and Northern Ireland
- Do I have to pay stamp duty as a first-time buyer?
- Do you both need to be first-time buyers to get stamp duty relief?
- Do non-UK residents get first-time buyer relief?
- When do first-time buyers pay stamp duty?
- First-time buyer stamp duty in Scotland
- First-time buyer stamp duty in Wales
- Can your mortgage affect first-time buyer stamp duty relief?
When buying your first home, stamp duty is likely to be one of many costs that are on your mind. However, thanks to first-time buyer stamp duty relief, many buyers will step onto the property ladder without paying any stamp duty at all. So, when do first-time buyers pay stamp duty, and how much may you have to save up if there is something to pay? Read on to find out.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured on it.
Stamp duty for first-time buyers
Stamp duty – or Stamp Duty Land Tax (SDLT) to give it its full name – is a tax that is payable if you purchase a property (or land) in England or Northern Ireland. Similar taxes also apply in Scotland and Wales, under different names.
But to try and make it easier to meet the upfront costs of buying a first home, stamp duty rules, thresholds and rates are different for first-time buyers compared with home movers.
» MORE: Stamp duty explained
Do first-time buyers pay stamp duty?
Stamp duty isn’t payable as a first-time buyer if you’re buying a property in England or Northern Ireland for less than £300,000. If your property costs more than £300,000, or you’re not considered to be eligible as a first-time buyer, stamp duty is payable. The more expensive your property, the more stamp duty you will pay.
How much is stamp duty for first-time buyers?
The amount of stamp duty first-time buyers pay is calculated in line with set thresholds and rates.
If the property costs between £300,001 and £500,000, stamp duty is payable at a rate of 5% on the proportion of the purchase price that falls within this band.
For example, if the home you’re buying costs £350,000, you would pay stamp duty of £2,500 (worked out as 5% of £50,000).
However, if your first home costs more than £500,000, first-time buyer stamp duty relief is not available and normal stamp duty rates apply.
First-time buyer stamp duty rates in England and Northern Ireland
| Purchase price | Stamp duty rate |
|---|---|
| Up to £300,000 (first-time buyer threshold) | 0% |
| Portion of price between £300,001 and £500,000 | 5% |
| £500,000+ | No relief, must pay at normal rates |
Do I have to pay stamp duty as a first-time buyer?
To qualify for first-time buyer stamp duty relief, the property you’re buying must be the first that you have owned either in the UK or anywhere else in the world. You must intend to use the property as your main residence. If you have previously inherited or been gifted a residential property, or intend to use your new property to rent out, you won’t be eligible for first-time buyer stamp duty relief.
Do you both need to be first-time buyers to get stamp duty relief?
When you’re buying with someone else, both of you must meet the definition of a first-time buyer to qualify for the relief. So if either of you previously owned a house jointly with a partner or spouse, relief is not available – this applies regardless of whether you owned a property as a joint tenant or a tenant in common.
Do non-UK residents get first-time buyer relief?
If you’re a first-time buyer but not a UK resident, there may be a 2% surcharge on top of the stamp duty rate you pay. To be classed as a resident you need to have been present in the UK for at least 183 days in the 12 months immediately prior to buying.
When do first-time buyers pay stamp duty?
If you have to pay stamp duty as a first-time buyer, you have 14 days from the date of completion of your purchase to file a return with HM Revenue & Customs (HMRC) and do so.
Usually, your solicitor will complete the necessary paperwork, pay it for you, and add it to your bill. If you need to arrange payment yourself, you can file and pay on the HMRC website.
It is worth noting that even if you have nothing to pay, a stamp duty return must still be completed to satisfy HMRC requirements. Again, your solicitor will often do this for you.
First-time buyer stamp duty in Scotland
If you’re a first-time buyer in Scotland, you don’t pay Land and Buildings Transaction Tax (LBTT) – the Scottish equivalent of stamp duty – on property valued at less than £175,000.
If it is worth more, first-time buyer stamp duty in Scotland is payable in line with the following LBTT rates and bands:
| Purchase price | LBTT rate for first-time buyers |
|---|---|
| £175,000 and below | 0% |
| £175,001-£250,000 | 2% |
| £250,001-£325,000 | 5% |
| £325,001-£750,000 | 10% |
| £750,001+ | 12% |
First-time buyer stamp duty in Wales
In Wales, there is no specific first-time buyer relief from Land Transaction Tax (LTT), its stamp duty equivalent. However, in line with the standard LTT rates, you won’t need to pay any tax if the property is worth less than £225,000.
Where a property is valued at more, the following LTT rates and bands apply:
| Purchase price | Standard residential LTT rates |
|---|---|
| £225,000 and below | 0% |
| £225,001-£400,000 | 6% |
| £400,001-£750,000 | 7.5% |
| £750,001-£1,500,000 | 10% |
| £1,500,000+ | 12% |
Can your mortgage affect first-time buyer stamp duty relief?
Knowing how different types of mortgage may affect your eligibility for stamp duty relief is important if you want to qualify.
- Joint mortgage: If you’re buying with someone else using a joint mortgage, you can qualify for first-time buyer stamp duty relief if you both meet the criteria of being a first-time buyer.
- Guarantor mortgage: It is possible to claim first-time buyer stamp duty relief with a guarantor mortgage, provided your guarantor isn’t named on the title deeds of a property.
- Shared ownership: You can qualify for stamp duty relief with shared ownership if the total value of the property is less than £500,000. This is true whether you decide to pay stamp duty on the full market value of the property or only on the share you purchase at the outset. While relief cannot be claimed if you subsequently buy more shares in the property (known as staircasing), stamp duty only becomes payable if your stake rises above 80%.
- Gifted deposit mortgage: You can be eligible for stamp duty relief if you’re buying using a gifted deposit, and the person giving you the money won’t be on the title deeds.
» MORE: First-time buyer mortgages
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