Buying your first home can be one of the most important moments in a person’s life.  While the process of buying your first home can be challenging and sometimes stressful, first-time buyers do enjoy the benefit of stamp duty relief.  In this article, we look at the details of First-Time Buyers’ Relief for buying a residential property in England.

 

Stamp Duty is a tax paid if the property you are buying is over a certain price. It’s important to note that Stamp Duty is only paid on properties worth £250,000 or over, with the exception to this being first-time buyers, who currently have stamp duty relief up to the value of £425,000. For the vast majority of property buyers who do pay SDLT, the rate is 5% between £250,001 and £925,000. This means that for those who aren’t first time buyers, they would pay £7,500 on a property which costs £400,000.

 

 

What are the criteria to claim stamp duty relief?

 

  • There is a purchase of a major interest in a single dwelling. If a purchase consists of two or more dwellings, the relief is not applicable. Also, the purchase of a leasehold property where the term is less than 21 years is not a major interest for the purposes of the relief. Relief cannot be claimed where the purchase consists of or includes non-residential land.

 

  • The purchase price is no more than £625,000. If the property is worth more than £625,000, there is no First-Time Buyers’ Relief and the buyer will pay the SDLT at the standard rates. If you are purchasing a leasehold residential property, the value of any rent payable under a lease is not taken into account.

 

 

  • The buyer must be an individual. If a company is the buyer or one of the buyers, no relief is available.  Moreover, if there are more than one buyer and one of the buyers is not first-time buyer, relief is not available either.

 

  • The buyer intends to occupy the property as his/her main residence. If there are more than one buyer, all the buyers must intend to occupy the property as their main residence. In order to determine whether the buyer intends the property to be his/her main residence, HMRC will consider all the facts and circumstances of the case.

 

 

  • The effective date of the transaction is on or after 23 September 2022 (for the current first-time buyer SDLT relief rate).

 

  • The purchase is not linked to any other land transactions, except for land that is or forms part of the gardens or grounds of the dwelling.

 

Am I counted as a first-time buyer?

 

The first-time buyer must not, either alone or with others, have previously owned or partly owned another residential property or mixed property which includes a major interest in a dwelling situated anywhere in the world.

 

If you inherited a property or are a beneficiary of a trust that owns a property, you will not be counted as a first-time buyer.

 

Nonetheless, the restriction does not apply where the interest acquired was the grant or assignment of a lease with less than 21 years to run.

 

Unlike considering whether the higher rates SDLT apply, HMRC will not consider whether the non-purchasing spouse / civil partner has previously owned a major interest in a dwelling.  Even though your spouse / civil partner has previously owned a residential property, as long as (1) you are a first-time buyer, (2) your spouse / civil partner is not one of the buyers and (3) he/ she does not currently own any other property, you can still be eligible to the first-time buyer relief if all criteria are met.

 

How much is the SDLT for first time buyers?

 

If you are eligible to claim the relief, the first-time buyer SDLT rates are as follows:

table for sdlt

The above SDLT rates will only be in place until 31 March 2025. The government announced that any transaction which completes thereafter will be subject to the increased rates of SDLT. Taking into account of the fact that an average residential property transaction takes between 12 to 16 weeks (but can be even longer in certain circumstances), if you plan to purchase your first home recently, you are advised to realise your plan sooner rather than later.

 

Have questions? Get in touch today!

 

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