Stamp duty land tax will be scrapped for first time buyers on properties worth £300,000 or less in England, Wales and Northern Ireland.
Additionally, those buying a first property worth up to £500,000 will only pay stamp duty of the value of the property over the £300,000 limit.
The Chancellor of the Exchequer, Philip Hammond, announced the measure in the autumn budget delivered on 22 November, with the cut taking immediate effect. According to the Chancellor, the move means that 95% of first time buyers will benefit from the cut, with 80% of first time buyers avoiding stamp duty altogether.
Prior to this announcement, anyone buying their first home paid stamp duty if the property was worth more than £125,000. Under these rules, someone buying a property worth £208,000 (the price of the average first time buyer property in the UK) paid £1,660 in stamp duty – now they will pay nothing.
Anyone buying a first property worth between £300,001 and £500,000 will now pay £5,000 less than before the autumn budget. The average first time buyer property in London currently costs £410,000 – previously this would have produced a stamp duty bill of £10,500, now the cost will be £5,500.
Anyone buying a first property worth over £500,000 will pay the same rate as before the cut.
Hammond cited a fall in the number of 25-34 year olds owning their own home from 59% to 38% over the last 13 years as a reason behind the cut. The Treasury suggest that the stamp duty cut could help over 1 million first time buyers to get onto the housing ladder over the next 5 years.
How stamp duty for first time buyers works
When buying a property, the buyer (or more normally their solicitor) will have to fill out a stamp duty land tax return. You will need to enter a code on the form indicating that you are a first time buyer and calculate your liability based on the new rates. You or your solicitor will then need to arrange for the relevant sum to be paid to the Treasury.
A first time buyer is defined as someone who has never owned an interest in a freehold or leasehold property and who is buying their only or main residence. It is important to note that residential property purchased anywhere in the world is considered when determining whether you qualify as a first time buyer. If you are buying a property with someone else, both of you need to qualify as first time buyers to be eligible for the first time buyer stamp duty exemption.
There are different rules for stamp duty in Scotland, where the cut will not take effect. Responsibility for setting and collecting stamp duty will also be devolved in Wales from April 2018 onwards, meaning the cut may cease to apply to Welsh properties as this will be a matter for the Welsh government to decide.
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To find out more about our conveyancing for first time buyers, call us today on 01636 600 656 or use our contact page to find details of your nearest office.
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