In the chancellor’s budget in November, changes were announced to the stamp duty payable by first-time buyers. Will your house purchase be affected?
The New Stamp Duty Rule for First Time Buyers
Up until last November, everyone buying a property in England, Wales and N. Ireland paid Stamp Duty Land Tax (SDLT) on purchases over £125,000. (Note: Stamp Duty Land Tax no longer applies in Scotland. There, you pay Land & Buildings Transaction Tax.)
However, the rules changed to help first-time buyers, and they do not now need to pay any SDLT on purchases up to £300,000 in value, and on properties of up to £500,000 they pay 5% only on the remaining amount over £300,000. On properties over £500K, they pay stamp duty as normal. This effectively exempts around 80% of first-time buyers from the tax, saving them up to £5000 in each case.
Are You in it Together?
One thing to note: if you are in a marriage or partnership and buying jointly, then you both need to be first-time buyers in order to qualify for this relief. You can try to circumvent this by only the first-time buyer being named on the deed, but you must be careful with this as they would then legally have sole claim on the house should you unfortunately split up for any reason. The relief is still capped at £5000, no matter how many names are on the deed.
Don’t Ignore the Return
To get the relief on this tax, you still have to complete the SDLT return, even if no tax is due.
How Much is Stamp Duty?
For those of us that are not first-time buyers, Stamp Duty Land Tax still applies to all property purchases over £125,000 in value. The percentage you are taxed rises with the value of the property, as in this table:
|Property Value / Lease Premium||SDLT Tax Rate|
|Up to £125,000||zero|
|The portion from £125,001 – £250,000||2%|
|The portion from £250,001 – £925,000||5%|
|The portion from £925,001 – £1,500,000||10%|
|The remaining amount, £1,500,001 and upwards||12%|
You need to submit an SDLT return within 30 days of completing the purchase of the property, or HMRC will charge you a fine and interest.
For a reliable assessment of the stamp duty you can expect to pay, check out our Stamp Duty calculator.
SDLT on Second Properties
If you’re buying a second property, then there is a higher rate to pay. The SDLT on second properties is 3% on top of the normal rate if buying a new house means you own more than one.
However, you can claim this back if you then sell what was previously your main residence within three years of buying the second property, and claim within 3 months of this sale.
Stamp Duty Land Tax Exemptions
There are a few instances where the transaction you make on a property is such that you do not need to tell HMRC about it, or file a SDLT return. They are:
- If no money or other payment changes hands (i.e. it was a gift)
- If the property was left to you in a will
- If the property is transferred to you due to a divorce, or dissolution of civil partnership
- If you buy a freehold property for less than £40,000
- If you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1000
- If you use alternative financial arrangements for the property, e.g. to comply with religious laws
Note – if you simply swap properties with someone else, then it is viewed that something of value was given as payment, even though no actual money has changed hands. SDLT will be applicable on the market value of the property.
When in Doubt…
Double-check with the HM Revenue & Customs website for information on all taxation matters. They present all the facts and issues in a simple, user-friendly way that leaves nothing to misunderstanding, and you can be sure that what you are reading is accurate and up-to-date.
Alternatively, if that seems a little labyrinthine, consult with the experts. Mortgage brokers and independent financial advisers will be able to tell you exactly where you stand when it comes to Stamp Duty Land Tax.
Want to Know More About Taxes Around Buying a House?
Get in touch with your local Mortgage Centres office today and speak to one of our friendly and professional advisers. They will be more than happy to take a look at what you need and go over all the details. House purchases don’t have to be complicated. Let us do the hard work for you.Speak to an Expert