Stamp duty for first-time buyers – what are the rules around exemption

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  • If you’re climbing the property ladder, make sure you understand the different stamp duty rules for first home buyers, which means lower stamp duty bills.

    Did you know there are different stamp duty rates for first home buyers? If you are planning to buy a home for the first time, make sure you know what relief you are entitled to if you and the property you are purchasing meet the required standards.

    Buying a home can be an extremely expensive activity, and every penny counts. This is especially true for first-time homebuyers, as those looking to climb the real estate ladder for the first time often spend years saving for a home.

    One issue holding back first-home buyers is that buyers must weigh various additional costs, including stamp duty, on top of transaction costs. Fortunately, the stamp duty rules that apply to first-time home buyers are completely exempt from taxation.

    Stamp duty is payable when you buy property or land in England or Northern Ireland. Similar tax systems exist in Scotland and Wales.

    Tim Walford-Fitzgerald, Partner at HW Fisher, explained: “Buyer Relief is the first to make it easier for people to take the first step on the wealth ladder.

    A capped holiday has been scheduled to keep the housing sector functioning during the pandemic. The holiday, which ends in October 2021, means that the threshold for the minimum property price from which tax will be charged has been raised from £125,000 to £500,000. It allows all types of homebuyers to climb the ladder at a discount and save up to £15,000.

    Does the first buyer have to pay stamp duty?

    The tax system does not mean that the first buyer automatically avoids paying stamp duty in full. However, that means they pay less than someone already on the new family ladder.

    The table below details the general stamp duty rates in the UK and Northern Ireland and compares the rates that apply to the first buyer only.

    Part of the purchase price Regular Stamp Duty Rate Tax rate for the first ticket
    0-125,000 lbs 0% 0%
    £125,000 to £250,000 two% 0%
    250,000 to 300,000 lbs 5% 0%
    300,000 to 500,000 lbs 5% 5%
    £500,000 to £925,000 5% 5%
    £925,000 to £1,500,000 ten% ten%
    £1,500,000 twelfth% twelfth%

    As you can see, today’s homebuyers are starting to pay stamp duty on purchases over £125,000. However, the first buyer will not start paying tax until the transaction value exceeds £300,000.

    To see how the exemption works in practice, let’s take the example of a non-first-time buyer buying a house for £300,000:

    • For the first 125,000 EUR you pay 0 EUR
    • For the portion between £125.00 and £250,000 you pay 2% which is £2,500
    • Between £250,000 and £300,000 you pay 5% which is £2,500

    Therefore, you will have to pay a total of £5,000 in stamp duty.

    However, first home buyers will not have to pay a penny of stamp duty on similar purchases thanks to an exemption included in Budget 2017.

    According to recent analysis by Barclays, the average price paid by first-time buyers in 2021 is £281,900. This shows that most first home buyers are not required to pay stamp duty even if the stamp licence is no longer valid.

    The state has a handy stamp duty calculator that can work out your bill based on your circumstances.

    It is worth noting that the relief for the first buyer, like the stamp duty itself, is slightly different in Scotland. Here, the minimum threshold is £175,000 before the first buyer starts paying Land and Building Transactions Tax (equivalent to stamp duty in Scotland).

    Meanwhile, first-home buyers in Wales are no exception. However, all types of homebuyers are exempt from paying property transaction tax on the first £180,000.

    Walford-Fitzgerald added: “Wales does not offer any special relief for first home buyers, but the starting point for land transaction tax in all three countries is as high as £180,000, and while this is certainly welcome, it may not be the case for first depositors on mortgages. The biggest worry about loan affordability.

    First Coupon Tax – What is the tax exemption rule?

    An important aspect of this exception is that it only applies to first-time home buyers. To qualify, you’ve never been so interested in residential real estate anywhere in the world. This will include property inherited from loved ones.

    Additionally, the first buyer must plan to make the property their own home, and in the case of a joint purchase, both parties must comply with HMRC’s terms.

    When can the first buyer pay stamp duty?

    Buying your first home for over £300,000 will result in the buyer paying the tax bill, but this is not so much the first step as someone paying to go upstairs to the property.

    So if you shop in one of the more expensive parts of the UK, such as London or the South East of England, you may still have to pay tax, albeit less than a typical homeowner. .

    For example, let’s say you bought a property in the capital for £450,000. Your stamp duty will be:

    • In the first 300,000-0 lbs
    • £300,000 to £450,000, 5% – £7,500.

    If the first buyer stamp is not exempt, the tax stamp will be £12,500. Even though the best rates for first-time homebuyer mortgages already exist, all new homeowners can get them without paying living expenses.

    However, keep in mind that you may not get any first-time buyer waivers for more expensive purchases. For first home buyers over £500,000, all first home buyer discounts will be forfeited.

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