First-time buyer stamp duty relief

There are many costs involved in purchasing your own home and paying the government’s stamp duty land tax, usually abbreviated to ‘stamp duty’, has long been one of the highest; even taking the process out of reach for some.

It was with welcome relief then that the chancellor announced a suspension of this requirement for many first-time buyers in his autumn budget last November. There is some history with this as it was also removed by a previous chancellor in the late noughties to help stimulate a struggling housing market in the wake of the credit crunch on a temporary basis – as it is, officially, this time around.

If more houses are sold, this helps the construction industry and others reliant on homebuying too, so it’s not just the buyers themselves who stand to benefit from this.

So, how does the first-time buyer stamp duty relief affect property purchasers currently (at the time of writing)?

So, here’s the rub. As it stands, if you have never owned property or land in the UK or abroad – this must apply to both of you if it is a joint mortgage and both applicants are on the mortgage deed – you do not have to pay stamp duty if you are buying a property and its value is £300,000 or less.

There has long been no stamp duty for properties purchased for £125,000 or less for all anyway. However, since 3rd December 2014, the stamp duty on properties valued between £125,000 and £250,000 has been 2%; with no stamp duty due for the first £125,000, the 2% is levied only on any sum between that £125,000 and £250,000. This means that if you are buying a £250,000 property, your stamp duty would work out at £2,500.

For purchasers buying properties that cost over £250,000 (and up to £925,000), the stamp duty rises to 5%. This means that someone buying a £300,000 property, for example, would be liable to pay £5,000 stamp duty.

For the moment, if you fit that first-time buyer demographic, your stamp duty in that scenario would be zero. For purchases over £300,000, you would still pay the stamp duty on the amount above it however, at least you would save that first £5,000.

As with the previous incentive almost a decade ago, this is a temporary relief at present. In effect, the government could announce its withdrawal tomorrow, though this does seem unlikely with current economic uncertainty cooling the housing market in some areas. It may encourage you to take that leap if you stand to benefit however, as always, you’ll need bespoke advice before deciding if it’s the right time for you to step on the housing ladder.

For the record, stamp duty is payable via your solicitor or legal representative, traditionally close to the end, or at the end, of the process. It often forms part of the solicitor’s final invoice. Unfortunately, if you have owned property or land before, then you would currently not benefit from this form of tax relief. If you are unable to remember if you have owned before, you or your solicitor can – and the solicitor will – check with the land registry among other sources.