Tim Leonard
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The costs involved with getting onto the property ladder can quickly add up, but with first-time buyer stamp duty relief there’s scope for a big saving to be made. That’s because if you pay less than £425,000 for your first home, and you meet the necessary eligibility requirements, stamp duty won’t need to be paid.
So, when do first-time buyers pay stamp duty? And, perhaps more importantly, what makes you eligible for first-time buyer stamp duty relief? Read on to find out.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a loan or any other debt secured on it.
What is stamp duty?
Stamp duty – or Stamp Duty Land Tax (SDLT) to give it its full name – is a tax that is payable if you purchase a property (or land) in England or Northern Ireland above a specific price. Similar taxes also apply in Scotland and Wales, under different names.
If the price of your new home is below the stamp duty threshold of £250,000, no stamp duty is payable. But if the purchase price is above the threshold, stamp duty rate bands determine how much you pay – the more expensive the property, the higher your stamp duty will be.
Importantly, stamp duty is calculated according to how much of the purchase price sits within each band, rather than the rate attached to the highest band you fall into being applied to the whole purchase price.
Stamp duty rates
| Purchase price | Stamp duty rate |
|---|---|
| Up to £250,000 (the threshold) | 0% |
| Portion of price between £250,001-£925,000 | 5% |
| Portion of price between £925,001-£1.5m | 10% |
| Portion of price above £1.5m | 12% |
It was confirmed in the Autumn Statement 2022 that the wider nil-rate threshold will fall back to its usual level of £125,000 with effect from 1 April 2025.
» MORE: Learn more about stamp duty
What is first-time buyer stamp duty relief?
First-time buyer stamp duty relief was introduced in November 2017 to help support those struggling to meet the upfront costs of buying a first home.
If you qualify for the relief by meeting the definition of a first-time buyer, a higher stamp duty threshold of £425,000 applies before stamp duty becomes payable. However, this is due to drop back to its usual level of £300,000 from 1 April 2025.
Do first-time buyers pay stamp duty?
If you’re an eligible first-time buyer buying a property worth up to £425,000 in England or Northern Ireland, there is no stamp duty to be paid. If the property costs between £425,001 and £625,000, stamp duty is payable at a rate of 5% on the proportion of the purchase price that falls within this band.
For example, if you’re purchasing a property for £475,000, you would pay stamp duty of £2,500 (5% of £50,000). Our stamp duty calculator allows you to calculate the stamp duty payable as a first-time buyer.
If you’re buying a first home for more than £625,000, first-time buyer stamp duty relief is not available and normal stamp duty rates apply. Note that this threshold is set to fall back to £500,000 from 1 April 2025, at the same time the nil-rate band for first-time buyers returns to £300,000.
Stamp duty rates for first-time buyers in England and Northern Ireland
| Purchase price | Stamp duty rate |
|---|---|
| Up to £425,000 (first-time buyer threshold) | 0% |
| Portion of price between £425,000-£625,000 | 5% |
| £625,000+ | No relief, must pay at normal rates |
Who qualifies for first-time buyer stamp duty relief?
To qualify for first-time buyer relief, the property you’re buying must be the first that you have owned either in the UK or anywhere else in the world. You must intend to use the property as your main residence. If you have previously inherited or been gifted a residential property, or intend to use your new property to rent out, you won’t be eligible for first-time buyer stamp duty relief.
Do you both need to be first-time buyers to get stamp duty relief?
When you’re buying with someone else, both of you must meet the definition of a first-time buyer to qualify for the relief. So if either of you previously owned a house jointly with a partner or spouse, relief is not available – this applies regardless of whether you owned a property as a joint tenant or a tenant in common.
Do non-UK residents get stamp duty relief?
If you’re a first-time buyer but not a UK resident, there may be a 2% surcharge on top of the stamp duty rate you pay. To be classed as a resident you need to have been present in the UK for at least 183 days in the 12 months immediately prior to buying.
How do first-time buyers pay stamp duty?
If you have to pay stamp duty as a first-time buyer, you have 14 days from the date of completion of your purchase to file a return with HM Revenue & Customs (HMRC) and do so.
Usually, your solicitor will complete the necessary paperwork, pay it for you, and add it to your bill. If you need to arrange payment yourself, you can file and pay on the HMRC website.
It is worth noting that even if you have nothing to pay, a stamp duty return must still be completed to satisfy HMRC requirements. Again, your solicitor will often do this for you.
First-time buyer stamp duty in Scotland
If you’re a first-time buyer in Scotland, you don’t pay Land and Buildings Transaction Tax (LBTT) – the Scottish equivalent of stamp duty – on property valued at less than £175,000.
If it is worth more, first-time buyers in Scotland will pay in line with the following rates and bands:
| Purchase price | LBTT rate for first-time buyers |
|---|---|
| £175,000 and below | 0% |
| £175,001-£250,000 | 2% |
| £250,001-£325,000 | 5% |
| £325,001-£750,000 | 10% |
| £750,001+ | 12% |
First-time buyer stamp duty in Wales
In Wales, there is no specific first-time buyer relief from Land Transaction Tax (LTT), its stamp duty equivalent. However, in line with the standard LTT rates, you won’t need to pay any tax if the property is worth less than £225,000.
Where a property is valued at more, the following rates and bands apply:
| Purchase price | Standard residential LTT rates |
|---|---|
| £225,000 and below | 0% |
| £225,001-£400,000 | 6% |
| £400,001-£750,000 | 7.5% |
| £750,001-£1,500,000 | 10% |
| £1,500,000+ | 12% |
What mortgages qualify for first-time buyer stamp duty relief?
Knowing how different types of mortgage may affect your eligibility for stamp duty relief is important if you want to qualify.
- Joint mortgage: If you’re buying with someone else using a joint mortgage, you can qualify for first-time buyer stamp duty relief if you both meet the criteria of being a first-time buyer.
- Guarantor mortgage: It is possible to claim first-time buyer stamp duty relief with a guarantor mortgage, provided your guarantor isn’t named on the title deeds of a property.
- Shared ownership: You can qualify for stamp duty relief with shared ownership if the total value of the property is less than £625,000. This is true whether you decide to pay stamp duty on the full market value of the property or only on the share you purchase at the outset. While relief cannot be claimed if you subsequently buy more shares in the property (known as staircasing), stamp duty only becomes payable if your stake rises above 80%.
- Gifted deposit mortgage: You can be eligible for stamp duty relief if you’re buying using a gifted deposit, and the person giving you the money won’t be on the title deeds.
» MORE: First-time buyer mortgages
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