Stamp Duty Guide for First Time Buyers

News at Household | 01/11/2019

First-time buyers are the largest group of property buyers in the United Kingdom. Therefore, there is a considerable level of interest in what first-time buyers do, and what support they receive in the property market. Other buyers may view first-time buyers as competition, while vendors need these buyers, as it ensures there are prospective buyers to target.

There have been many changes to the market in recent years, some of which have been focused on assisting first-time buyers step on to the property ladder. Any first-time buyer in England doesn’t pay stamp duty on properties which hold a value up to £300,000. This helps these buyers save up to £5,000; which is a considerable sum of money.

Buying a home is expensive, and first-time buyers often struggle to save for a deposit. Any measure which reduces some of the financial strain and pressure these buyers are under should be considered a good thing. There will be other buyers who feel they are penalised while first-time buyers receive this benefit, but this isn’t necessarily the case.

When the property bought by a first-time buyer costs up to £500,000; the buyer only pays stamp duty on the last £200,000. As an example, a first-time buyer purchasing a house at £450,000 would only pay duty on £150,000. This is because the first £300,000 doesn’t count for stamp duty purposes. If the property is priced at more than £500,000; there is no relief for first-time buyers.

There is support for this cut-off point, because many will argue if you can afford to buy a property at that price, you don’t need the stamp duty relief. Of course, the London property market is a very different situation, and that price isn’t out of the ordinary, even in homes that are suited to first-time buyers.

When do you have to pay Stamp Duty?

It used to be you had 30 days to file a Stamp Duty Land Tax (SDLT) return, and any pay SDLT which was due, but this changed on 1st March 2019. Property buyers now have 14 days to file their SDLT, which may place some buyers under pressure to arrange their finances. However, given the amount of financial planning and organisation associated with buying a property, this aspect should be part of your consideration, if you are required to pay.

The 14-day period begins of the effective date of transaction, which is usually the date the purchase of the property is completed. Any buyer who owes stamp duty and who doesn’t submit a return and pay the tax within the 14 days may find they are penalised by the HMRC. This may include being charged interest, and penalties on top of the amount owed in stamp duty.

Paying stamp duty

Usually, stamp duty is taken care of by your solicitor, although there is nothing to stop you from carrying out this work yourself. Note that even if you don’t ow any stamp duty, you are required to fill out a return and pass it to HMRC.

If you are a first-time buyer looking for support or you are a vendor looking to sell to a first-time buyer, we are here to assist you. Contact Household and we will be more than happy to help.