New figures show how stamp duty relief has helped first-time buyers get onto the property ladder.

Nearly 500,000 first-time buyers have saved money through stamp duty relief since the tax exemption was first launched.

A total of 464,700 transactions have been exempt from the tax since it was introduced in November 2017, saving buyers in England and Northern Ireland £1.11 billion.

First-time buyer relief was claimed on more than one in five transactions during the final quarter of the year, saving buyers £154 million – the highest quarterly total since the tax break was first introduced, according to the Office for National Statistics.

But the level of revenue raised through the 3% surcharge for people buying a second home or investment property fell by 3% during the same period, as buy-to-let landlords continued to be cautious about expanding their portfolios.

Why is this happening?

The government introduced the first-time buyer relief on stamp duty in 2017 to help more people get onto the property ladder.

The move means buyers who have never previously owned a property and plan to live in the home they are buying do not pay stamp duty on the first £300,000 of their home’s price.

On house sales valued at up to £500,000, they pay the tax at 5% on the portion of the price between £300,000 and £500,000.

Mother and son decorating new home

Who does it affect?

Stamp duty relief for first-time buyers has been credited with helping more people get on to the property ladder, alongside other government schemes such as the Help to Buy equity loan and Help to Buy ISA.

By contrast, the 3% surcharge for those buying an investment property, combined with a number of other tax changes, has been blamed for a fall in the number of landlords entering the private rental sector.

The drop in investors buying property has also helped first-time buyers, as the two groups typically chase the same homes at the bottom of the housing ladder.

What’s the background?

Total revenue from stamp duty on residential purchases was slightly down year-on-year reflecting the subdued level of home sales in the property market in 2019.

A total of 752,600 residential transactions were liable for stamp duty in 2019, 3% fewer than in 2018, while receipts were also 3% lower at £8.28 billion.

Within this total there was a slight increase in the number of homebuyers who were liable for stamp duty at a higher rate.

The number of homes bought for between £125,000 and £250,000, which are liable for stamp duty at the 2% rate, fell by 3% during the fourth quarter compared with the same period of the previous year.

At the same time, there was a 5% rise in transactions valued at more than £500,000, on which stamp duty is charged at 5% on the portion of the transaction over £250,000, and as much as 12% on the portion above £1.5 million.

Top 3 takeaways

  • First-time buyers have collectively saved more than £1 billion since the government first launched stamp duty relief for those getting on to the property ladder

  • More than one in five transactions during the final quarter of the year claimed first-time buyer relief, saving home buyers £154 million – the highest quarterly total since the tax break was first introduced

  • The level of revenue raised through the 3% surcharge for people buying a second home or investment property fell by 3% during the final three months of 2019, compared with the same period of 2018

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