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When buying a property in the UK, stamp duty is a crucial consideration as it can add thousands to the purchase price. One of the most substantial tax reliefs is the first time buyer stamp duty, which results in minimised to zero tax liability for qualifying first-time buyers.
This article explores everything about stamp duty for first-time homebuying, covering the first-time buyer stamp duty relief, how to claim, how this relief interplays with other SDLT rules, and other frequently asked questions.
Introduction to Stamp Duty 2024
Stamp duty is the tax paid on buying a property in the UK. England and Northern Ireland refer to it as Stamp Duty Land Tax (SDLT); Scotland, Land and Buildings Transaction Tax (LBTT), and Wales, Land Transaction Tax (LTT). Generally, it is simply referred to as stamp duty.
These UK constituents have different bands, rates, and reliefs. To aid people up the property ladder, the government exempts eligible first-time buyers from stamp duty, provided their purchased properties do not exceed the current threshold rates.
First Time Buyer Stamp Duty 2024
Do first time buyers pay stamp duty? They do, unless they qualify as a legitimate first-time homebuyer and have secured a property within the tax-free threshold. Even if they exceed the threshold, first-time buyers eligible for relief pay less in stamp duty.
Wales have no official first time buyer stamp duty relief, unlike England, Nothern Ireland, and Scotland, but it offers the same equivalent systems, with a starting tax-free threshold at a different rate.
First Time Buyer Definition
To be legitimately considered a first-time buyer, an individual must meet the following criteria:
- Property bought is intended to be their only or main residence
- No existing freehold property
- No existing leasehold interest
- No foreign or inherited property
If they are proven to be first-time buyers, they may be eligible for SDLT first time buyer relief (requirements discussed further below).
First Time Buyer Relief for Stamp Duty
Property ownership in the UK becomes even more financially challenging given its taxation rules. The government’s first-time buyer relief for stamp duty is a huge help to many, as it makes going up the property ladder more feasible.
This section discusses the specific requirements first-time buyers must meet to qualify for the relief and how stamp duty is paid.
When Can You Claim First-Time Buyer Stamp Duty Relief?
Aside from being a legitimate first-time buyer, the following conditions must also be met to qualify for the relief:
- The buyer must be an individual, not a company or a limited liability partner (LLP).
- If joint buyers, those named on the title deeds must be both an individual and a first-time buyer.
- The purchase must be for a single dwelling, not multiple.
- The buyer must not have owned an interest in residential property.
- The purchase must be for residential use, not commercial.
- The buyer must intend to use the property as a main dwelling.
- The purchase price must not exceed the current £625,000 threshold.
- The transaction must not be linked, such as same buyer and seller or the involved parties are closely associated.
When Can You Not Claim First-Time Buyer Stamp Duty Relief?
The first-time buyer relief is only available to only and main residential dwellings, which infers non-residential properties are not counted for the stamp duty exemption.
Moreover, first-time buyers may not qualify for the relief if they purchase properties for mixed use, such that they lease to a shop below and build a flat above. Mixed-use properties are neither residential nor non-residential, so this follows different stamp duty rates.
Check out our Stamp Duty Land Tax Calculator UK for more information about non-residential property rates.
How Do First Time Buyers Pay Stamp Duty?
With or without stamp duty to pay, first-time buyers are obliged to file a stamp duty return within fourteen (14) days when the property is completely and successfully transferred. Those who have stamp duty to pay must also submit and pay the return within this timeline.
Filing the return late will incur a penalty of:
- £100 in three months
- £200 if it exceeds three months
- Up to 100% of tax value after 12 months
- Accumulated penalty + £60 per day if the buyer does not act on HMRC’s letter requesting the return to be filed
It is highly recommended that payments are made within fourteen (14) days to avoid any penalties and/or interest charges. However, since stamp duty payments must be made in full and are not currently available on an instalment plan (except for those in a shared ownership scheme), HMRC allows a thirty (30) day period to pay the entire stamp duty bill.
Usually, many first-time home buyers hire a soliciting or conveyancing professional to handle their tax affairs. They can also reach tax experts on this matter.
2024 Rates of UK Stamp Duty for First Time Buyers
All UK constituents impose different thresholds from which no stamp duty is paid. Whilst there is no outright first-time buyer legislation in Wales, it has an equivalent threshold system. Here are the current thresholds for the 2024/25 tax year:
| UK Constituent | Tax-Free Threshold |
|---|---|
|
England & Northern Ireland |
£425,000 |
|
Scotland |
£175,000 |
|
Wales |
£225,000 |
These are the starting tax-free amounts. In England and Northern Ireland, only eligible first-time buyers can take advantage of the threshold and reduced stamp duty. Those unqualified automatically pay the normal rate. See below for more detailed information about first-time buyer rates.
SDLT Rates (England & Northern Ireland)
Here are the SDLT first-time buyer rates for the 2024/24 tax year:
| Purchase Price | SDLT Rates |
|---|---|
|
Less than £425,000 |
0% |
|
Between £425,001 and £625,000 |
5% |
|
More than £625,001 |
Normal Rates |
Overseas buyers pay an extra surcharge of 2%. That means a 2% stamp duty charge for a property priced less than £425,000 and 7% from that amount up to £625,000. For UK residents, eligible first-time buyers only pay 5% after the tax-free amount up to £625,000.
For example, a UK resident eligible for first-time buyer relief bought a house worth £430,000. The individual would only pay 5% stamp duty on the remaining £5,000 that exceeded the tax-free threshold of £425,000. This arrives at a mere £250 tax bill, a huge saving for first-time buyers.
Anyone buying a property worth more than £625,000 is automatically disqualified for first-time buyer relief and must pay the normal stamp duty tax rates. Take note that stamp duty in England and Northern Ireland is yet to face another change by April 2025, according to the Autumn Budget 2022.
LBTT Rates (Scotland)
Scotland’s current stamp duty rates for first-time buyers are as follows:
| Purchase Price | LBTT Rates |
|---|---|
|
Less than £175,000 |
0% |
|
Between £175,001 and £250,000 |
2% |
|
Between £250,001 and £325,000 |
5% |
|
Between £325,001 and £750,000 |
10% |
|
More than £750,001 |
12% |
LTT Rates (Wales)
In Wales, homebuyers do not pay tax on the first £225,000 portion of their total purchase price. This is regardless of whether they are first time buyers or not. For the current tax year, here are the full LTT rates:
| Purchase Price | LTT Rates |
|---|---|
|
Less than £225,000 |
0% |
|
Between £225,001 and £400,000 |
6% |
|
Between £400,001 and £750,000 |
7.5% |
|
Between £750,001 and £1.5m |
10% |
|
More than £1.5m |
12% |
First Time Buyer Stamp Duty Relief and Other SDLT Rules
Here are how the first-time buyer relief and other SDLT rules interplay:
- When Purchasing Additional Properties
This is automatically considered a second home purchase, which means the first-time buyer relief is made counterfeit, even if the individual is a legitimate first-time buyer.
- When Buying with Other People
All buyers whose names will be put in the title deed must be legitimate first-time buyers. If one of them is not, joint purchasers may not qualify for the first-time buyer relief. The best possible way is to only put the first-time buyer’s name in the title deed.
It is worth noting that this may affect their mortgage rates credit, as following this path means the mortgage agreement will involve only one person. Basing on a single income, lenders may offer lower loan ranges.
- When Buying as Married Couples or Civil Partners
In the case of married or civil partners, they are automatically considered as one unit for tax purposes. This means that even if one of them is a first-time buyer, they still cannot avail the first time buyer stamp duty relief.
- When the Property was Transferred
The relief is only available when the property was “purchased” and for residential purposes. This means if the property is transferred, such as through a gift or will, the first-time buyer stamp duty relief does not apply.
- When the Buyer Uses Alternative Finance Arrangements
If the individual is tested and found to be a legitimate first-time buyer, they may be eligible for relief even if they use alternative financing means.
- When it is a Buy-to-Let Property
The first-time buyer stamp duty relief is only available for properties intended to be the main dwelling. If it is rented out completely, the relief will not apply. However, it applies if only some rooms are rented out.
Frequently Asked Questions
No. Anyone who inherited a property is no longer a first-time buyer in the taxman’s eyes.
If the buyer’s name is in another property’s title deeds, the person is not considered a first-time buyer, even if they do not completely own the property.
In November 2023 findings, the average purchase price of a home for first-time buyers amounts to £236,000.
At present, the average price of a home in the UK is £33,070.
Houses are more expensive in the UK as its land expanse is smaller if compared to other countries, such as Canada, USA, etc.
How Can Legend Financial Help?
The first time buyer stamp duty relief has several conditions to meet. Legend Financial is here to help you not only with obtaining relief but also settling tax and financial implications related to UK homeownership, including filing a stamp duty return, tax advice if you proceed to rent your property, financial management, and more.
We are a trusted tax and financial advisor, serving all kinds of taxpayers throughout the UK. Google us and you will see the most positive reviews. Legend Financial is here to provide you with the most comprehensive and professional tax support. Talk to one of our tax experts today!
