First-time buyers are able to benefit from Stamp Duty Land Tax (SDLT) relief when they buy their first home – but only if the property that they are buying does not cost more than £500,000. It was announced in the 2018 Budget that the relief would be extended retrospectively to first-time buyers buying their first share in a shared-ownership property.
The relief is worth up to £5,000.
SDLT relief for first-time buyers was announced in the Autumn 2017 Budget and introduced with effect from Budget day (22 November 2017). It applies to purchases of residential property of £500,000 or less by a first-time buyer, provided that the purchaser intends to occupy the property as their only or main home.
Where the relief applies, the first-time buyer pays no SDLT if the price paid for their first home is £300,000 or less.
If the first home costs more than £300,000 but less than £500,000, there is no SDLT to pay on the first £300,000 of the consideration, but the excess over £300,000 is liable to SDLT at 5%.
Chris buys his first home, a two-bedroomed flat costing £380,000. He will live in it as his main residence. The purchase completes in November 2018.
As the purchase price is less than £500,000, he is able to benefit from first-time buyer relief.
He pays SDLT of £4000 on the purchase ((£300,000 @ 0%) = (£80,000 @ 5%)).
For comparison, a person buying a similar property who was not a first-time buyer would pay SDLT of £9,000 ((£125,000 @ 0%) = (£125,000 @ 2%) + (£130,000 @ 5%)). The availability of the relief saves Chris £5,000 in SDLT.
The relief is not available where the first-time buyer buys a property costing more than £500,000 – SDLT is payable at the normal residential rates.
It was announced at the time of the 2018 Budget that SDLT relief for first-time buyers would be extended to purchasers of qualifying shared ownership properties who do not elect to pay SDLT on the market value of the whole property when they buy their first share.
The relief applies to the first share purchased where the market value of the shared ownership property is £500,000 or less. Those paying less than £300,000 for their first share do not pay any SDLT; whereas those paying between £300,000 and £500,000 for their first share pay SDLT of 5% on the excess over £300,000. The relief also applies to any SDLT on the rental payments. However, it only applies on the purchase of the first share – it does not apply if further shares are purchased.
The relief is backdated to apply retrospectively from 22 November 2017. First time buyers who have already purchased their first share in a shared ownership property since 22 November 2017 and paid SDLT without the benefit of the relief can claim a refund.
First-time buyer relief must be claimed in the SDLT return, or, where the return has already been filed, by amending the return.
If you need more information on SDLT for First Time Buyers, we recommend contacting one of our specialist tax accountant. We offer free advice with no obligation to use our services.