The below article was written to reflect the Stamp Duty policy from 1st July 2021.
As a first-time buyer, there are plenty of costs you need to grapple with before you end up on the property ladder. One of the most talked about costs is stamp duty.
This tax is often in the news as its been subject to a number of changes over the years, especially in the wake of the 2020 pandemic. If you’re not sure what this means for your budgeting, here’s a breakdown of costs for stamp duty and first-time buying.
What is stamp duty?
It’s full name is Stamp Duty Land Tax (SDLT), which should help explain what exactly this charge is. Stamp duty is a tax levied on the purchase of property and land in England and Northern Ireland. The cost is determined as a percentage of the purchase price. The more expensive the property, the bigger the stamp duty involved.
Do first-time buyers pay stamp duty?
From August 2017, new rules mean that the answer is probably not.
For homes that cost £300,000 or less, there is no stamp duty for first-time buyers. That means the majority of first-time buyers will pay no stamp duty at all.
For first time buyers, buying homes above that threshold will only have to pay stamp duty on the value above £300,000, as long as the property is valued under £500,000. If the property is bought for more than £500,000, then the full stamp duty will be levied.
These changes do not affect buyers in Scotland, who pay Land and Buildings Transfer Tax rather than stamp duty.
Do you qualify as a first-time buyer?
You are only eligible for stamp duty relief if…
- You have never owned a property before - this includes overseas property or property you may have inherited
- The property you are buying is your only and main residence
Remember: you cannot get stamp duty relief if you are purchasing a buy-to-let.
First-time buyer rules for couples
Whether you’re buying with your spouse, civil partner or even with a friend, unless you are both classed as a first-time buyer, you will not be eligible to benefit from these rules. This is also true if you are buying a property with a parent. Put simply, if any of the people on the deeds have currently or previously owned a property, you will have to pay the full stamp duty.
Joint borrower, single owner mortgages
Some lenders do offer mortgages that allow more than one person to be liable for the loan, whilst the property is in the sole ownership of one party.
For example, a parent's income can be used to qualify a loan that is in both their and their child's name. However, in this arrangement, only the child’s name is on the deeds. There are not many lenders who will offer this type of mortgage and, due to its more complex nature, we strongly recommend seeking advice.
Unsure about the costs involved?
To discuss the stamp duty rules in more depth, plus the other costs associated with buying a property, get in touch with our team!
