Do first-time buyers pay stamp duty?

The law of TAMPON can be difficult to understand, but it is important that any homebuyer understands it, even first-time buyers.

Stamp duty can add thousands of pounds to the cost of your move, but if you are a first-time buyer, you may be exempt.


Stamp duty rates have changed several times this year, but first-time buyers may be exemptCredit: Getty

Adding to the confusion, stamp duty rates have changed during the pandemic. But here’s all you need to know.

What is stamp duty?

Stamp Duty Property Tax (SDLT) is a lump sum payment you must make when purchasing a property above a certain threshold.

Who has to pay it?

First-time buyers do not have to pay tax on homes under £ 300,000. They only have to pay it on properties that cost more than that.

However, first-time buyers of property worth between £ 300,000 and £ 500,000 pay a reduced stamp duty.

Prior to July 8, 2020, for other home buyers in England and Northern Ireland, the threshold at which stamp duty was levied was for properties costing over £ 125,000.

Have ther rules have changed?

Yes. In July 2020, Chancellor Rishi Sunak raised the threshold from which you start paying stamp duty. He did so as part of the coronavirus ‘mini-budget’.

Under the ‘stamp holiday’, those who buy a house or apartment worth £ 500,000 or less do not have to pay the tax (as long as the property is their primary residence).

The aim was to give buyers a break, but also to bring the real estate market back to life.

But rates started to rise again at the end of June and will change again at the end of September.

What does this mean for first-time buyers?

First-time buyers have benefited from the stamp duty holiday in the same way as other first-time buyers.

How much can I save as a first-time buyer?

First-time buyers pay no stamp duty on homes under £ 300,000.

That’s a saving of £ 5,000 compared to someone who is not a first-time buyer buying a £ 300,000 home.

But if the property is more expensive, the tax kicks in.

From 1 October, first-time buyers pay the usual stamp duty rate of 5% on the amount between £ 300,001 and £ 925,000.

So if you buy a house worth £ 500,000 you will pay £ 10,000 in stamp duty.

Again, this is a serious saving because for other buyers you start paying 2% stamp duty at £ 125,001 which drops to 5% on anything over £ 250,001.

A non-first-time buyer buying a £ 500,000 house would pay a stamp duty of £ 15,000.

If you want to check how much stamp duty you can expect to pay, there are many calculators online that can help, including one from the Money Advice Service.

What has the stamp duty freeze meant for the real estate market?

The payment holiday has seen demand for housing skyrocket in recent months. It started a mini-boom and house prices went up.

Many buyers and sellers were trying to rush deals before the June 30 deadline to take advantage of the bigger savings. The last weekend of September is expected to see a similar panic before rates return to normal.

Many buyers and sellers fear that sales will fail due to delays in mortgage approvals and property transfers – and they fear they won’t be able to complete on time.

What will happen after September 30?

From October 1, the normal beginner relief rules will apply again, and there will be no stamp duty payable on the first £ 300,000 of a primary residential property.

For home movers (who are not beginners), the stamp duty holiday was phased out between July and the end of September.

During this period there was a £ 250,000 zero rate bracket which means there is no stamp duty payable on houses costing up to £ 250,000.

It was hoped that this phased approach would provide a soft landing as the housing market hopefully returns to a semblance of normalcy. But there is also speculation that house prices could rise right now.

Temporary stamp duty rates (July 1 to September 30)

0% if a house is worth up to £ 250,000 (£ 300,000 for first time buyers)

5% if a house is worth between £ 250,001 and £ 925,000

10% if it is worth between £ 925,000 1 and £ 1.5 million

12% on anything over £ 1.5million

(Prices are different in Wales and Scotland)

Stamp duty rate from October 1

0% if a house is worth less than £ 125,000 (£ 300,000 for first-time buyers)

2% if a house is worth between £ 125,001 and £ 250,000

5% if it is worth between £ 250,001 and £ 925,000

10% if it is worth between £ 925,000 1 and £ 1.5 million

12% on anything over £ 1.5million

(Stamp duty rates are different in Wales and Scotland)

Word of warning

As a first-time buyer you should be aware that the £ 300,000 threshold will not apply if the house you are buying costs more than £ 500,000. If so, you will pay the normal rate of stamp duty.

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