Want to save thousands of pounds in stamp duty buying your first home, but wondering whether you’ll meet the criteria? Find the answers here.

UPDATED 9 NOVEMBER, 2018

In his Autumn Budget 2017 the Chancellor, Philip Hammond waived stamp duty land tax on the first £300,000 of the cost of a home for first-time buyers. It applies to homes worth up to £500,000 with immediate effect.

This means that, for purchases of residential homes that complete on or after 22 November 2017, first-timers will pay zero stamp duty on the first £300,000. 

For homes costing between £300,001 and £500,000, a rate of 5% will apply – but only on that slice of the purchase price.

But how does the Government define a first-time buyer and what else does it take to qualify for the tax perk?

Here's our simple round-up of what you need to know.

Q. How does the Government define a first-time buyer?

A.  As someone who has never owned a property or any share of one – whether bought, gifted or inherited – at any time during their life, either inside or outside of the UK.

In addition, you will need to live in the home you are buying as your only residence – and not be planning to rent it out.

Q. What if the person I am buying with isn't a first-time buyer?

A. As the perk is strictly limited to first-time buyers, all purchasers of the home must meet the criteria set out above. If one of you doesn't, then standard stamp duty rates will apply – for example, £5,000 on a home costing £300,000.

Q. Does the perk apply to purchases in Scotland, Wales and Northern Ireland?

A. As well as England, the stamp duty perk applies in Northern Ireland.

In Wales the relief only lasted a short time as stamp duty land tax was replaced for transactions in Wales with Land Transaction Tax with effect from 1 April 2018.

The perk does not apply to purchases in Scotland. Stamp duty has already been devolved there (1 April 2015) and replaced with the Land and Buildings Transaction Tax (LBTT).

Northern Ireland offers the same tiered stamp duty system as England’s.

Q. Does it apply to leasehold property?

A. Yes. The waiver applies to both freehold and leasehold homes so long as the lease has 21 years or more to run. 

Q. What if I am buying a further share of my first property that I live in? 

A.  If you have a current interest in a home, you'll normally no longer be classified as a first-time buyer. This means any further shares you want to buy of it will be subject to standard stamp duty rates.

But there are exceptions which apply in rare cases:

  • The current interest is a lease which, when you acquired it, had less than 21 years to run
  • When you acquired the interest it was not a “dwelling”. For example it was a plot that since been built on or a commercial property that's since been converted.

Q. Does the stamp duty break apply if I use Help to Buy?

A. Yes. So long as you meet the criteria of a first-time buyer, you'll be eligible for the stamp duty break when purchasing under the Government's Help to Buy scheme.

Q. What if I'm buying with a shared ownership scheme? 

A. You can choose to pay stamp duty upfront on the whole value of the home (known as 'market value election') or in stages as you buy further shares.

Under the original rules, so long as you opted to be taxed upfront (and the home's market value does not exceed £500,000), you could be eligible for the stamp duty break. However, those who elected to pay stamp duty in stages could obtain the benefit of the relief.

That was changed by the Budget on 29 October 2018 with retrospective effect. So those buying on a shared ownership basis and electing to pay SDLT in stages can be entitled to the relief, both on the up front price they pay and on the net present value of the rents. The relief does not extend to any further SDLT due when they staircase to over 80%.

There are some limits still. For example, the property must not have been worth over £500,000 at the date of the purchase.

Chapter 6 of the HMRC guidance here has been rewritten to give more detail.

Q. I exchanged before 22 November, 2017. Do I qualify?

A. The first-time buyer tax break applies to completed property transactions made on or after 22 November 2017. When you exchanged contracts will not be relevant.

Q. I completed just before 22 November 2017? Do I qualify?

A. No. Unfortunately, relief is not available on purchases that completed before 22 November 2017 – even by a day.

Q. What if I've paid stamp duty and shouldn't have done?

A. The solicitor or conveyancer dealing with your purchase has 14 days from your completion date to pay stamp duty on your behalf to HMRC via a Stamp Duty Land Tax return.

If completion took place on or after 22 November 2017, they should have claimed relief on your behalf. (This is done by adding a 'code 32' to the return which indicates you qualify as a first-time buyer.)

If, for some reason, the return was submitted without the relief, you can claim it back by instructing your solicitor to amend the stamp duty return (details of how to do this are set out clearly on HMRC's website). In the case of claims for shared ownership leases where the relief has been given retrospectively, the deadline for making a claim is extended to 28 October 2019.

HMRC points out that you will have to amend your return by post as telephone applications are reserved for more minor amendments.

Q. I'm definitely a first-time buyer. How do I check what stamp duty I should pay?

A.  This calculator from HMRC should do the trick.

Q. Where can I find out more?

HMRC has published some guidance here which was updated on the publication of the 2018 Budget on 29 October 2018.

Stamp duty land tax specialist John Shallcross has written an article about some of the more complicated issues surrounding first time buyers’ relief including:

  • That the test looks at interests “acquired” which could be by way of gift or inheritance as well as by purchase.

  • The odd position if a person (who would otherwise qualify as a first time buyer) buys a property alone but is married to (or is in a civil partnership with) someone who owns another property.

  • The position with properties bought in the name of a nominee or where trusts are involved.

  • What happens with properties with a granny flat or other ancillary dwellings.

  • The treatment of cases where property is put into joint ownership, such as where it belongs to one person but a share is transferred to a spouse so they jointly own it (particularly where there is a mortgage).

  • How linked transactions can prevent the relief applying or cause a clawback of relief previously claimed.

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