First-time Buyer Stamp Duty Relief Explained

Saving for a first home can be challenging but what if stamp duty could be scrubbed off your list of costs? Well, qualify for first-time buyer stamp duty relief and this tax on buying a new home can be avoided altogether, or at least reduced.

Tim Leonard Last updated on 01 February 2023.
Fact Checked
First-time Buyer Stamp Duty Relief Explained

The costs of buying a home can quickly add up when you’re trying to get on to the property ladder, 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.

Qualifying for first-time buyer stamp duty relief could allow you to redirect some of your savings towards a bigger deposit. And this may mean you’re in a position to apply for a mortgage much sooner than you thought, or can turn your attention away from 95% LTV mortgages to higher deposit mortgage deals offering better rates.

So when do first-time buyers pay stamp duty and, perhaps most importantly, what makes you eligible for first-time buyer stamp duty relief? Read on to find out.

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 buying your new home is below the stamp duty threshold of £250,000, you avoid paying stamp duty. 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%

Section of price between £250,001-£925,000

5%

Section of price between £925,001-£1.5m

10%

Section of price above £1.5m

12%

As part of the Autumn Statement 2022 it was announced that the wider nil-rate threshold will fall back to £125,000 with effect from 1 April 2025.

As part of the Autumn Statement 2022, it was announced that the wider nil-rate threshold will fall back to £125,000 with effect from 1 April 2025.

» MORE: Learn more about stamp duty

What is first-time buyer stamp duty relief?

To help support those struggling to meet the upfront costs of buying a first home, the government introduced first-time buyer stamp duty relief in November 2017.

As a result, if you meet the definition of a first-time buyer, a higher stamp duty threshold applies. Currently, there is no stamp duty to pay at all if you’re a first-time buyer purchasing a property worth £425,000 or less. Following an announcement in the Autumn Statement 2022, this is due to fall back to £300,00 from 1 April 2025.

Who qualifies for first-time buyer relief?

To qualify as a first-time buyer, you must be buying a property which you intend to be your main residence. It must also be the first property that you have owned either in the UK or anywhere else in the world. If you have previously inherited or been gifted a residential property, or intend to use your new property as a buy-to-let investment, you won’t be eligible for first-time buyer 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.

» MORE: Getting a mortgage as a first-time buyer

Stamp duty rates for first-time homebuyers

For first-time buyers who buy a property worth up to £425,000, there is no stamp duty to be paid. Pay between £425,000 and £625,000, and stamp duty is applied at a rate of 5% on the proportion of the purchase price above £425,000. For example, if you are a first-time buyer purchasing a property at a price of £475,000, you would pay stamp duty of £2,500 (5% of £50,000).

Where a first home is purchased at a price above £625,000, first-time buyer stamp duty relief is not available and normal stamp duty rates apply. This will fall back to £500,000 from 1 April 2025, at the same time as 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%

Section of price between £425,000-£625,000

5%

£625,000

No relief, must pay at normal rates

How were first-time home buyers affected by the stamp duty holiday?

During the stamp duty holiday, the higher nil-rate threshold of £500,000 that was introduced applied to first-time buyers too. That meant first-time buyers could buy a property worth up to £500,000 and pay no stamp duty at all.

When the wider stamp duty rate dropped to £250,000 from 1 July 2021, the usual first-time buyer stamp duty relief threshold of £300,000 came back into force.

The increase to £425,000 has since been introduced as part of the mini budget announced in September 2022. Subsequent to this, in the Autumn Statement in November 2022, it was revealed the threshold will drop back to £300,000 from 1 April 2025. The maximum value of a property on which first-time buyer stamp duty relief can be claimed will also fall back, from £625,000 to £500,000.

What types of mortgage 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 be eligible for first-time buyer stamp duty relief, but only if both of you meet the definition 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: Regardless of whether you choose to pay stamp duty on the full market value of the property or only the share you are buying initially, stamp duty relief is available with shared ownership as long as the total property value is less than £625,000. 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: -Assuming you are receiving a true gifted deposit, and your giftee won’t appear on the title deeds, you’ll be eligible to claim stamp duty relief.
  • Help to Buy: Bona fide first-time buyers using a Help to Buy mortgage can make use of stamp duty relief too.

» COMPARE: First-time buyer mortgages

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.

Do first-time buyers pay 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%

Do first-time buyers pay 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

LBTT rate for first-time buyers

£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%

Image source: Getty Images

About the author:

Tim draws on 20 years’ experience at Moneyfacts, Virgin Money and Future to pen articles that always put consumers’ interests first. He has particular expertise in mortgages, pensions and savings. Read more

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