A guide to stamp duty for first-time buyers

Buying a house can be a complex process, especially for inexperienced first-time buyers. There’s much to think about, from mortgage offers to solicitor fees, home surveys, removals, and even home and contents insurance. If you’ve never moved house before, then purchasing your own home can feel daunting – especially if the people around you are talking about things you don’t know about.

Stamp duty is one of those topics where everyone will assume you have the same levels of knowledge and understanding. But if you are buying a house for the first time, then it’s highly likely that you will not know what it is, how much it could cost and who pays it.

To help simplify the house-buying process, we’ve compiled an overview of everything first-time buyers need to know about stamp duty.

What is stamp duty?

Stamp Duty Land Tax (also referred to as SDLT) is a tax that you will pay on the purchase of any property or land.

You will be asked to pay stamp duty whether you are buying a freehold or leasehold property, whether you are buying via a shared ownership scheme, or you are transferred land or property in exchange for payment.

Stamp duty is a progressive rate system. You will not pay stamp duty on the total property price. Instead, you will pay a specific rate on one proportion of the property and a different rate on another proportion.

We promise it’s simpler than it sounds!

Is stamp duty applicable to the whole of the UK?

It’s important to realise that stamp duty is only the name of the tax if you are buying a property in England or Northern Ireland.

If you purchase a property in Scotland, you will have to pay Land and Buildings Transaction Tax (LBTT).

If you buy a home in Wales, you will need to pay Land Transaction Tax (LTT).

For clarity, the information in this article relates only to stamp duty land tax. Therefore, this article is only relevant for those purchasing a property or piece of land in England or Northern Ireland.

How much is stamp duty land tax?

There are different thresholds in place which will determine how much stamp duty you may be asked to pay.

Here is an overview of the current stamp duty thresholds from 01 October 2021.

Property purchase priceStamp duty land tax rate
Up to £125,000 (£300,000 for first-time buyers)0%
£125,0001 – £250,0002%
£250,001 – £925,0005%
£925,001 – £1,500,00010%
£1,500,001 +12%

Let’s imagine that someone is purchasing a property to the value of £380,000.

There would be 0% stamp duty to pay on the first £125,000.

Then 2% on the value of £125,001 up to £250,000.

Then 5% of the value from £250,001 up to £380,000

Therefore, the final stamp duty price would be £9,000

Do first-time buyers need to pay stamp duty?

It’s good news for first-time buyers.

Those buying their first property are exempt from paying stamp duty on the first £300,000 of their property price, as long as the total purchase price does not exceed £500,000.

If you are a first-time buyer and your property purchase is £275,000, you will pay no stamp duty tax because it is under the £300,000 threshold.

If you aim to purchase a property priced at £425,000, you will pay 5% on the portion between £300,000 and £425,000.

If your purchase price is over £500,000, you will pay the standard stamp duty rates.

Do I qualify as a first-time buyer?

You may be surprised by how often people are unsure whether they are classified as first-time buyers or not.

A first-time buyer is someone who has never owned a house before.

It’s important to understand that the term first-time buyer relates to the ownership of a property – not just the purchasing.

Therefore, if you have previously inherited a house or own a share in another house (perhaps your parents’ house) and your name is on the deeds of a property, you will not be categorised as a first-time buyer.

If I am a first-time buyer, will I pay stamp duty if my partner has previously owned a house?

We are often asked this question.

Unfortunately, first-time buyers can only benefit from stamp duty relief if they have never owned a property before.

If you are married or purchasing a property jointly with a partner who has previously owned a house, your application will not qualify as a first-time buyer. As such, you will not be eligible for any stamp duty tax relief.

You could benefit from a stamp duty saving if you choose to put the house in the sole name of the person who has never owned a home before. However, if you decide to do this, your mortgage application will be based upon one person’s salary rather than both parties. This could significantly impact your affordability.

At Mortgagemove, our trained mortgage advisers are well equipped to answer any questions that you may have about eligibility for first-time buyer schemes. They can also help to secure a competitive mortgage offer on your behalf.

Can I benefit from stamp-duty relief if I’m a first-time buyer and I’m buying a buy-to-let property?

In some circumstances, a person who is a first-time buyer and has never owned a property before may decide to invest in a buy-to-let option.

However, stamp duty tax relief is only available to first-time buyers who intend to purchase the property as their primary residence.

When do you need to pay stamp duty?

Your stamp duty will need to be paid to HMRC within 14 days of completion.

Often, your conveyancing solicitor will file your SDLT return and make the payment on your behalf. They will then add the amount due to your final invoice.

You should always seek clarification from your conveyancing team as to who is taking responsibility for paying your stamp duty land tax bill. Failure to pay or late payments could incur a fine or added interest.

Can you add the cost of stamp duty to the cost of your mortgage?

It is possible to add the cost of stamp duty to the amount of money you are borrowing on your mortgage.

However, if your mortgage is taken out over many years, you will pay interest on the additional money you borrow. Therefore, you could find that your interest payments may exceed the initial cost of the stamp duty over the term of your mortgage.

It could also affect the loan-to-value ratio of how much you are borrowing. Again, this could tip you into a higher interest bracket.

We would recommend discussing your options with your Mortgagemove broker. Then, we can explain the different implications and repayment options with you.

Mortgagemove can help you understand the financial implications of buying a house

At Mortgagemove, we work closely with our clients to identify the right mortgage options for first-time buyers.

We understand that buying your first home can be daunting. We know that you will have lots of questions about the process. We are here to help make it easy and offer impartial advice and guidance on finding the right house for you.

Our team of expert advisers will guide you through each stage of your mortgage application. We can discuss the various first-time buyer deals and government schemes available to help you purchase a home for the first time.

Then, once you know what options are available, we can use our network of UK lenders to secure an Agreement in Principle (AIP). This is an indicator of how much money you can borrow. With an Agreement in Principle ready, you can confidently make an offer on your dream home.

From here, we will manage your mortgage application on your behalf. Our team will keep you updated on every stage of your application, and you can sit back and relax knowing that we are here to help.

To find out more about how we work, call our freephone mortgage advice line on 0333 005 0333. In just a 15-minute discovery call we can evaluate your financial circumstances and offer you helpful financial advice. Alternatively, please text ADVICE to 82228.

Your home may be repossessed if you do not keep up your mortgage repayments.

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