Buying your first home is an exciting milestone, but for first-time buyers it can be difficult to understand all the property costs, including Stamp Duty Land Tax (SDLT). One of the most frequently asked questions is: “Do first-time buyers pay stamp duty?” Knowing the facts about paying stamp duty is key to budgeting for your property purchase and avoiding unexpected expenses.
The good news is that thanks to the First-Time Buyer Relief Scheme, you may not have to pay stamp duty at all, or pay much less than buyers moving up the ladder. The UK Government has introduced special rules to help first-time buyers in England and Northern Ireland. In this blog, we will discuss stamp duty thresholds, eligibility criteria, exemptions and what happens as property prices change.
Expert advice from mortgage experts eden hawkcan help you clarify your qualifications and navigate unique or complex situations.
What is Stamp Duty Land Tax (SDLT)?
Stamp duty land tax is a government tax that must be paid when purchasing residential property or land in England and Northern Ireland. Stamp duty rates vary depending on the price of the property and the circumstances of the purchase. Although different rules and transaction taxes apply in Scotland and Wales (Land and Buildings Transaction Tax and Land Transaction Tax), we will focus on SDLT, which applies to most property purchases in England and Northern Ireland.
The important thing to remember is that stamp duty is calculated in bands. Similar to income tax, you pay a different tax rate on each portion of the property value that falls within each range. Most property purchases require SDLT to be paid when the property value exceeds a certain threshold. For non-first-time buyers, standard rates apply from £250,000 and above, but first-time buyers benefit from a higher threshold.
Good news: relief for first-time buyers
Under the first-time buyer relief scheme, first-time buyers are exempted or reduced from stamp duty when they purchase a property up to a specified price. This scheme allows you to save money and reduce initial costs. Understanding how much stamp duty you should or should not pay can have a big impact on your household finances.
The following cases are eligible for first-time purchaser relief:
- You (and the person you are buying with) have never owned residential property or had a primary residence anywhere in the world. This includes freehold sales, leasehold properties, inherited properties and shared ownership schemes.
- The property is valued at less than £625,000.
How much stamp duty does a first-time buyer pay?
Be clear about stamp duty thresholds and available reliefs.
- Properties up to £300,000:
Stamp duty is 0%. This means first-time buyers buying property worth up to £300,000 will pay no tax at all.
- Properties from £300,001 to £500,000:
Stamp duty is 5%, but only on amounts over £300,000.
- Properties over £500,000:
First-time purchaser deduction does not apply. You pay stamp duty on the entire purchase price at the standard house tax rate.
Example 1:
Would you like to buy your first home for £350,000?
The first £300,000 is free, the remaining £50,000 costs 5%, for a total of £2,500.
Without relief, the SDLT bill would be approximately £7,500.
Example 2:
If your purchase price is £500,000, up to £300,000 is free and the remaining £200,000 will be subject to a 5% surcharge (equivalent to £10,000).
Example 3:
Even if you buy a new build property for £700,000, the relief will not apply because the price is over £500,000. Stamp duty is payable at standard rate: 0% for the first £125,000, 2% for the next £125,000 and 5% for the next £925,000.
Worth noting:
Stamp duty rates and property value standards are often subject to change in the Government’s Spring Budget or Autumn Statement.
Always check the latest official guidance before buying a home.
What qualifies me as a first-time buyer?
Being a first-time buyer doesn’t just mean you’ve never bought a home in the UK before. To be eligible for stamp duty relief, you must not own, or have a significant interest in, residential property, either within or outside the UK. This applies to all buyers. For example, if you purchased the property jointly with someone who previously owned the property, you will not be eligible for relief.
Inherited properties, freehold or leasehold properties, and shares in houses and flats all count as previous ownership and will therefore pay SDLT at the normal rate. If your situation is complex or you are unsure of the stamp duty rate that applies to your purchase, it may be worth seeking advice from a mortgage broker who is familiar with land tax and housing market changes.
Shared ownership, leasehold rights, and special circumstances
Shared ownership allows you to buy shares in a property and pay rent on the remaining shares. Regarding stamp duty, you can:
- You only pay SDLT on the shares you buy now, and more later as you move up the ladder (and get more shares).
- Pay the full market price in one lump sum, and claim relief if the property price is within the standard value.
Leasehold rights, inherited shares and joint purchases each have different rules for stamp duty relief. For most property purchases, your solicitor or conveyancer will process the SDLT declaration, calculate the amount of stamp duty you need to pay and pay it to the Revenue on your behalf.
When and how do I pay stamp duty?
SDLT usually needs to be paid within 14 days of completing the home purchase. Most buyers simply pay their tax through their solicitor, who collects the return and submits it to HMRC. Even if you do not pay stamp duty (because the property is below the first-time buyer threshold), you will still need to file a return.
Make sure your upfront costs are in good standing and funds are available at closing, as you may incur penalties if you miss the payment deadline.
Frequently asked questions about stamp duty
- What is the stamp duty rate for first-time buyers?
0% on the first £300,000 and 5% thereafter on up to £300,001 (asset value). For orders over £500,000 you will pay the standard rate.
- Is shared ownership always eligible?
Yes, if the overall property price is within the threshold and you qualify as a first-time buyer.
- If I inherit real estate, will I have to pay stamp duty?
No, but you lose.
- First-time buyers are exempt if they later make their own purchase.
- Does location within the UK matter?
Stamp duty land tax applies in England and Northern Ireland. There are different tax rates and exemptions in Scotland and Wales.
Points for first-time buyers
First-time buyer relief means most property purchases under £300,000 will not have to charge stamp duty. For more expensive homes, stamp duty for first-time buyers will vary depending on the property price, but the relief will reduce costs compared to the standard rate. Estates valued at over £500,000 are excluded (standard stamp duty rates apply).
Eligibility for Time Buyer Relief is conditional on you not owning any equity in your previous principal residence or residential property. Always check your personal circumstances with a lawyer or an experienced mortgage advisor, especially if you are unsure of which fees or thresholds apply.
Careful budgeting and planning for initial costs such as stamp duty and land tax will make the process of buying your first residential property less stressful. Knowing exactly how much you need to pay allows you to focus on what’s most important: moving into your new home.
