First time buyers' relief for stamp duty land tax

Saving for a first home can be challenging and the costs of buying a property can quickly add up. However, individuals who have never owned a home before might qualify for a first-time buyers’ relief for stamp duty land tax (SDLT) with the tax on buying a new home being either eliminated completely or significantly reduced.

What is first-time buyers’ relief?

To help support those struggling to meet the upfront costs of buying a first home, the government introduced first-time buyers’ relief back in November 2017. This applies to house purchases in England and Northern Ireland.

For anyone meeting the definition of a first-time buyer, a higher stamp duty land tax threshold applies. From 23 September 2022, any first-time buyer purchasing a property worth £425,000 or less will pay no SDLT at all. This limit is due to remain until in place until March 2025 when it is due to revert to £300,000.

It is worth noting that even if there is no SDLT to pay, a return must still be completed, and the relief claimed. The return is usually drafted and submitted by the conveyancing solicitor, so it is important to make them aware if you are a first-time buyer.

Who is considered a first-time buyer?

To qualify as a first-time buyer, an individual must be buying a single dwelling which she (or he) intends to be their main residence. It must also be the first dwelling that they have owned either in the UK or anywhere else in the world. If an individual has previously been gifted or inherited a residential property or intends to use their new property as a buy-to-let investment, they will not be eligible for first-time buyer SDLT relief.

When a person is buying with someone else, both individuals must meet the definition of a first-time buyer to qualify for the relief. Therefore, if either you own a house jointly with a partner or spouse, relief is not available – this applies regardless of whether you were joint tenants or a tenants in common.

SDLT rates for first-time buyers  

For first-time buyers who buy a property worth up to £425,000, there is no stamp duty land tax to be paid. Properties worth between £425,000 and £625,000 are taxable at a SDLT rate of 5% on the proportion of the consideration above £425,000. For example, if you are a first-time buyer purchasing a property at a price of £500,000, you would pay a stamp duty of £3,750 (being 5% of £75,000).

However, where a first home is purchased for consideration in excess of £625,000, first-time buyers’ relief is not available and normal SDLT rates apply.

Which types of mortgages or borrowing structures might qualify for first-time buyer stamp duty relief?

• Help to buy – bona fide first-time buyers using a help to buy mortgage can make use of stamp duty relief too
• Shared ownership – regardless of whether someone chooses to pay stamp duty on the full value or only on the share a person is buying initially, stamp duty relief is available with shared ownership as long as the market value is £625,000 or less
• Joint mortgage – if two individuals are buying a property on a joint mortgage, the transaction may be eligible for first-time buyer stamp duty relief but only if both individuals meet the definition of first-time buyer
• Joint borrower sole proprietor mortgage – it may be possible for first-time buyers’ relief to be claimed where the other joint borrower has no beneficial interest or right to occupy the property (where they would otherwise not be a first-time buyer). There are special rules applying where a new lease is taken on a flat
• Gifted deposit mortgage – assuming the person who is buying the house is receiving a true gifted deposit, and the donor will not appear on the title deeds or have any beneficial interest in the property, the buyer will be eligible to claim stamp duty relief

We would recommend all parties to the borrowing take independent financial advice and that the terms are considered to ensure the relief rules are met.

What if I am buying a first home in Wales or Scotland?

Unfortunately, there is no first-time buyers’ relief available for first homes purchased in Wales.

Scotland has its own stamp tax regime and has a relief for first-time buyers which increases the nil rate band of land and building transaction tax (LBTT) to £175,000. The maximum relief in Scotland is therefore limited to £600 which is far less generous than in England and Northern Ireland.