Prospective first time buyers, were delighted with the announcement in the recent budget that the Chancellor was introducing a relief from Stamp Duty Land Tax (SDLT) for first time buyers of residential property for £500,000 or less. First time buyers will now pay no SDLT on purchases up to £300,000 and 5% on the amount above £300,000 if the purchase price does not exceed £500,000.
What is SDLT?
SDLT is a tax payable on the purchase of any property. The tax payable gradually increases in line with the purchase price.
What are the changes?
Prior to the announcement in the recent budget, SDLT was payable on every purchase of residential property above £125,000. For example, a first time buyer purchasing a property worth £300,000 would have paid £5,000 in SDLT. A first time buyer purchasing a property worth £500,000 would have paid £15,000 in SDLT.
Following the Chancellor’s announcement, first time buyers purchasing a property worth up to £300,000 will now pay no SDLT. First time buyers purchasing a property worth between £300,000 and £500,000 will pay 5% SDLT on the amount above £300,000. For example, a first time buyer purchasing a property worth £500,000 will now pay £10,000 in SDLT, saving £5,000.
Who qualifies for the relief?
In order to qualify for the new first time buyer’s relief, the purchase must meet the following criteria:
• The purchase must be of a single dwelling, i.e. a self contained house or flat.
• The purchase price must not be more than £500,000. There is no first time buyer relief available for purchases over £500,000.
• The prospective purchaser(s) must be individuals and, if there is more than one purchaser, each individual must be a first time buyer. In order to qualify as a first time buyer, an individual must not have previously acquired any interest in land anywhere in the world, whether by gift, inheritance, through a trust or otherwise.
• The prospective purchaser(s) must intend to occupy the house or flat as their main residence.
• The effective date of the purchase (usually the date of completion) must be on or after 22 November 2017. It does not matter whether contracts were exchanged before this date.
• The purchase must not be linked to another transaction.
The relief is claimed in the Land Transaction Return submitted by your solicitor to HMRC following completion of the purchase.
What difference will the relief make?
The relief means a potential saving for first time buyers of up to £5,000. Although the biggest upfront payment for first time buyers remains the deposit (which is generally 10% of the purchase price payable on exchange of contracts), a saving of up to £5,000 is a welcome relief for many first time buyers looking to get onto the property ladder. That £5,000 can certainly help towards works required to renovate the property and that all important new sofa. That first step onto the ladder may have moved slightly closer and that is something for our generation to celebrate.
If you are a first time buyer looking to purchase a property or have any other enquiries in relation to this blog, please feel free to contact a member of our Residential Conveyancing team.