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Stamp Duty & First Time Buyers – The Facts

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

Stamp duty first time buyer and Introduction

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.

Amount of Relief – Stamp Duty First Time Buyer

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 Rates – Stamp Duty First Time Buyer

Consideration paidRate
Up to £300k0%
Between £300k – £500k5%
Over £500kNormal rates apply to FULL purchase price

Definition of First-Time Buyer

A first-time buyer is:

  • an individual;
  • has neveracquired 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 relief first time buyers, or stamp duty in general, then please get in touch

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