Buying a House > Conveyancing > SDLT > First-Time Buyers

It’s not easy trying to get on the property ladder these days.

UK house prices have undergone a meteoric rise over recent decades. According to research from Halifax, first-time buyers have seen property prices in the UK go up by a fifth (21%) since 2008, from £172,000 to £209,000 today. And this has meant two things. Firstly, buyers are needing higher salaries – which typically come later in one’s career – in order to secure mortgages. And secondly, buyers need larger and larger deposits. In 2008, the average first-time-buyer deposit stood at around £19,400. By 2019, this had increased to £33,100 – a 70% surge.

This situation is exacerbated in London, where the average house prices for first-time buyers now stand at £420,000, with average deposit sizes of £115,000 – a full three times higher than it was back in 2008.

So, if you’re an aspiring first-time buyer, it’s understandable to feel like the dice aren’t exactly loaded in your favour. But it isn’t all bad news: as of November 2017, you now qualify for stamp-duty relief. Stamp duty, or Stamp Duty Land Tax (SDLT) as it’s also know, is essentially a tax on the exchange of property – and it’s often a hefty figure coming on top of a string of other costs. After all, moving house is not exactly a cheap process! To put things in perspective, the standard SDLT amount paid on a £300,000 property is £5000. Well, luckily for you if you’re a first-time buyer, you will now pay £0 stamp duty on a £300,000 property.

Let’s take a closer look at the rules for properties based in England. We cover Scotland and Wales in a separate post.

Stamp Duty Bands for First-Time Buyers

The idea behind stamp duty relief is helping cash-strapped younger buyers onto the property ladder. Stamp duty is something you have pay up front and could almost be seen as an extension of your deposit. Having less to pay at this point means you can get your deposit payment together quicker. Or, alternatively, it means you have more money to contribute to a deposit – and a larger deposit will give you more favourable repayment terms over the course of your mortgage.

In line with this ethos, stamp duty relief only applies on properties worth up to £500,000. On the bright side though, if you can afford to spend more than half a million on your first house, you’re probably doing OK in life! If you do qualify for the exemption, you pay nothing on the first £300,000 of your purchase, after which the percentage you pay reverts to the standard SDLT rate. So here we have it:

First-Time Buyer SDLT for Properties Worth up to £500,000

Purchase price bands (£)First-Time Buyer SDLT Rate (%)
Up to £300,0000%
£300,000 – £500,0005%

These rates apply across the country, which means first-time buyers outside of the capital will likely escape SDLT-free, while those in the capital will probably still have some stamp duty to pay. Luckily though, this will never exceed £10,000 (representing 5% of the £200K in the £300K-£500K band).

First-Time Buyer SDLT for Properties Worth up to £500,000

Purchase price bands (£)First-Time Buyer SDLT Rate (%)
Up to £300,0000%
£300,000 – £925,0005%
£925,000 – £1,500,00010%
Above £1,500,00012%

The above rates are the same as the standard rates paid by non-first-time buyers.

What Constitutes a First-Time Buyer?

A first-time buyer is someone who has never wholly or part-owned a residential property. If you have received property as an inheritance or gift, or acquired it through a financial institution, then you no longer count as a first-time buyer. The same applies if you used to own property but have since sold it, including any property owned abroad.

If you’re buying as part of a joint purchase, then all partners will need to be first-time buyers to qualify for stamp-duty relief.

You can own commercial property, which encompasses non-residential and mixed-use categories, and still be considered a first-time buyer when buying a residential property. Commercial SDLT often works out less than stamp duty paid on residential properties, which – combined with stamp-duty relief for first-time buyers – can create dubious incentives for people buying multiple properties.

For example, if you’re buying two properties, you pay less by presenting the first one as mixed-use commercial and the second as first-time-buyer residential. This compares to paying residential rates on the first and higher second-home rates on the second. However, HMRC is aware of the potential loopholes existing in stamp duty legislation and is under no obligation to accept the status of the properties as claimed by the buyer. So, if your property purchases depend on accessing a preferential SDLT rate, then it’s best to consult a tax specialist before proceeding – so that you don’t end up stuck with higher rates that you perhaps cannot afford, should HMRC reject your claims about the properties.

Claiming Stamp Duty Relief

If you meet the criteria we have outlined in this post, you automatically qualify for stamp duty relief. The solicitor or licensed conveyancer taking care of your property purchase will take care of matters on your behalf.