Do First Time Buyers Pay Stamp Duty?

Please note that the information contained in this article is for general guidance purposes only and should not be considered as legal, financial, or tax advice.

All information regarding Stamp Duty is taken from the government website and is in-line with the September 2022 Mini-Budget. The laws and regulations related to Stamp Duty are subject to change, and the information in this article may not reflect the latest updates or changes in the law.

The amount payable for Stamp Duty will entirely depend on personal circumstances. Please speak with the solicitor acting on your behalf, who will be more appropriate to advise on this.

Information Source: MoneyHelper

Stamp Duty Land Tax is a type of tax that owners of residential properties may have to pay in England or Northern Ireland. It applies to both leasehold and freehold properties, with it also applying to those who have a mortgage and have bought outright.

A first time buyer will not have to pay Stamp Duty on a property that is worth £425,000 or less. If your property is worth more than that, up to £625,000, you won’t pay Stamp Duty on the first £425,000. You will at that point have to pay Stamp Duty on the remaining amount at a 5% rate, up to £200,000.

If your property costs over £625,000, you will not qualify for first time buyers relief and will pay the standard rates of Stamp Duty. In order for you to qualify as a first time buyer for this relief, you must be purchasing your only or main residence, having never owned a property in-land or abroad.

These current rules, at the time of writing, are set to last until March 2025. At that point, Stamp Duty will revert back to the previous thresholds.

Why was Stamp Duty relief introduced for first time buyers?

To make the property market more accessible, the government revised the Stamp Duty regulations for first time buyers. As you may already be aware, gathering the funds to cover mortgage applications, deposits, and conveyancing fees can be already be quite the task.

Existing property owners are lucky enough to have invested equity in their homes, which can be used to cover the expenses of buying a new property. First time buyers, on the other hand, are frequently renters or may not have the same level of equity that they can depend on.

Are there any exceptions to the rule?

As mentioned above, the exceptions to this are properties worth over £425,000, up to £625,000 (wherein you will pay a percentage of the amount over £425,000) and over £625,000, where you do not qualify for first time buyer relief.

Unfortunately, if you have inherited a property, even if you’ve never owned a home before, you also do not qualify for first time buyer relief. The same applies to those who have bought a share in a property and if you are buying jointly with someone else, who isn’t a first time buyer themselves.

Additionally, if you are looking at first time buyer buy to let, you will be paying Stamp Duty. This will be because you are making a buy to let purchase and not a residential property purchase. The amount payable will vary depending on your circumstances, so you should speak to your solicitor about this.

How do I pay stamp duty?

Normally, your solicitor will handle the Stamp Duty return and payment on your behalf, although you can opt to do it yourself. In any case, it is your responsibility to ensure that the return is filed on time. Even if you do not need to pay any Stamp Duty, you must still file a return, unless you are exempt.

It’s important to note that the Stamp Duty rates and rules may vary depending on the location of the property. It’s always a good idea to check with your solicitor or conveyancer to make sure you understand the specific tax rules that apply to your property purchase.

Additional Costs for First Time Buyers: What Else to Consider?

In addition to Stamp Duty costs, if you’re applying for a first time buyer mortgage, you may also be wondering what other costs you’ll both have to and could be paying. One of the biggest ones is your deposit. Typically speaking, a mortgage lender will require at least 5% deposit.

If you have had poor credit or are looking to access better rates of interest, a deposit of 10-15% may be better for you to put down. In addition to this, another cost you will definitely be paying for are solicitors or conveyancing fees.

After this, there will be a selection of maybe fees, costs you may need to pay but don’t always apply to every single case. These include a mortgage arrangement fee, which is a cost from your mortgage lender for setting up your mortgage. Then there are valuation and survey fees that you may have to pay.

If you chose to use a mortgage broker, that mortgage broker may sometimes have a fee of their own, though this is very much dependant on that case. Then there are the general costs, such as removals, potential repair costs, furnishing costs and home insurance.

As said though, many of these are not guaranteed and in some cases are optional. A mortgage advisor will be able to give you a much more accurate outline of the potential costs you could be faced with on your journey to home ownership.

Is there any support available for first time buyers?

First time buyers who are finding it difficult to get onto the property ladder, can benefit from knowing there is help available to them. Not only is there Stamp Duty relief for first time buyers, but there are also a variety of other schemes designed to make owning a home much more accessible.

The more popular ones include Shared Ownership mortgages, where you purchase a share of a property and pay rent on the rest, as well as Forces Help to Buy (FHTB), designed to help service members to borrow up to 50% of their salary, up to £25,000, interest free.

Learn more about Forces Help to Buy.

Prospective home buyers who are currently council tenants may also have access to a Right to Buy mortgage, wherein eligible tenants can purchase their property for a discounted price. Depending on the mortgage lender, you will often see that discount take the place of a deposit.

It’s also worth mentioning the benefit of a Lifetime ISA. This is a savings account that you can put funds into, contributing towards your deposit. You are able to save up to £4,000 per year, with the government topping it up by 25%, up to a maximum of £1,000 per year.

You can learn more about the various schemes mentioned above, as well as additional and more niche schemes on the government Own Your Home website.

Alternatively, you can get in touch with a trusted mortgage advisor, who will be able to run through these with you and get the ball rolling on your very own mortgage journey.

Date Last Edited: 10/05/2023

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