In November 2017, the UK’s Chancellor of the Exchequer announced in his Autumn Budget speech that first-time buyers would, under certain circumstances, become exempt from paying stamp duty land tax. The news was welcomed by many; however, it is crucial to understand exactly how the new arrangements will affect you if you are a first-time buyer considering investing in a UK property.
What is stamp duty?
Stamp duty is a tax that must be paid when purchasing a property or piece of land in England or Northern Ireland that is over a certain price. At the time of writing, the price threshold is £125,000 for residential properties and £150,000 for non-residential properties and land. Similar laws apply in Scotland where buyers are liable for Land and Building s tax, and Wales where they must pay Land Transaction Tax if the sale was completed on or after 1 April 2018.
Different rules apply if you are buying a property for the first time.
What are the rules for first-time buyers?
As of last year’s Autumn Budget, first-time buyers who purchase their property on or after 22 November 2017 can be eligible for relief from stamp duty, so long as the property costs less than £500,000 and the purchaser intends to use it as their only or main residence. Properties worth less than £300,000 will not require any stamp duty tax at all, while those costing more than £300,000 but less than £500,000 will only pay 5% on the amount above £300,000.
What kinds of property sales are not eligible for stamp duty relief?
The purchase must include only one, single dwelling and must not be linked to any other separate property or land transactions, except when there is land attached to the property, for example, a garden. The tax relief also does not apply to non-residential properties or land, or any properties that are ‘mixed use’, i.e. a shop with a residential flat above it. Any properties over the value of £500,000 will also not fall under this legislation.
How does the government identify a first-time buyer?
To be considered a first-time buyer, you must not have acquired a major interest in a property or land anywhere in the world prior to this transaction. You cannot have purchased property or land before or inherited or been given it as a gift. If a property is being bought jointly, by more than one party, all people involved in the purchase must meet these conditions for the sale to be considered eligible for first-time buyers’ stamp duty relief.
How can I find out more?
Your estate agent and solicitor should be able to answer most questions or point you in the right direction for further details. Additionally, there is plenty of information available online via the UK government’s website at www.gov.uk. There are also online stamp duty calculators where you input the relevant figures to see if you are eligible for tax relief and if not, how much stamp duty you would need to pay if you go ahead with a property transaction.