- November 23, 2017
- Posted by: hopkinslaw
- Category: Conveyancing, Property Law
The Chancellor Philip Hammond has unveiled the Government’s financial plans in the 2017 Autumn Budget – including abolishing stamp duty for many first-time buyers.
What is stamp duty?
Stamp duty land tax is a lump-sum tax that anyone buying a property or land costing more than a set amount has to pay. The rate at which you’ll pay the tax varies based on the property price.
So what’s the new system for first-time buyers?
In England, Wales and Northern Ireland, the new stamp duty rates for first-time buyers buying properties costing up to £500,000 are as follows:
- Up to £300,000 purchase price: 0% stamp duty
- £300,000.01 to £500,000: 5% (on that portion of the purchase price only)
Who counts as a first-time buyer?
Anyone who hasn’t owned a property before anywhere in the world, whether bought or inherited.
You also won’t qualify for the discounted rates if you’re buying to let – even if it’s your first purchase. The property you’re buying needs to be used as your main residence.
I’m a first-time buyer but I’m buying with someone who isn’t. Do we get the lower rates?
If you’re a first-time buyer jointly purchasing a home with a non first-time buyer, sadly you WON’T qualify for the first-time buyer rates. You both need to be first-time buyers.
I’ve exchanged but not yet completed. When does this come into effect?
It’s actually already in effect, as of 00.01am on 22 November 2017.
The requirement to pay stamp duty is triggered when you complete the purchase of the property. So if you’ve exchanged prior to 22 November but not completed, you’ll be charged under the new first-time buyer stamp duty system.
How much will first-time buyers save?
The maximum stamp duty saving that you can make under the new system, compared with standard rates, is £5,000. You’ll make this saving if you’re buying a property costing between £300,000 and £500,000.
However, the Office for Budget Responsibility has warned that this measure is actually likely to increase property prices, which could ultimately wipe out any gain from lower stamp duty payments.
This won’t fundamentally change the housing market
Guy Anker, managing editor of MoneySavingExpert.com, said: “This could benefit lots of first-time buyers, but it’s unlikely to significantly affect whether someone can afford to buy their first home, as the key barrier in many regions is high house prices.
“The average first-time buyer pays around £210,000 for their first home, which means they’ll save £1,640 on stamp duty under this new system.
“That’s clearly a step in the right direction but it won’t fundamentally change the housing market, especially if it leads to higher house prices.”
I’m a first-time buyer spending £500,000+. How much will I pay?
If you’re a first-time buyer purchasing a property for more than £500,000, you’ll pay under the standard stamp duty system which also applies to those who AREN’T first-time buyers.
If you’re buying a higher value property you’ll pay a different rate for different proportions of the property’s price and they’ll all add together to give the final stamp duty you pay. This works as follows:
- Up to £125,000 purchase price: 0% stamp duty
- £125,000.01 to £250,000: 2% (on that portion of the purchase price)
- £250,000.01 to £925,000: 5% (on that portion of the purchase price)
- £925,000.01 to £1,500,000: 10% (on that portion of the purchase price)
- £1,500,000.01+: 12% (on that portion of the purchase price)
For example, if you’re buying a property costing £670,000, you’ll pay £23,500 in stamp duty, made up of 2% of the portion of the property costing £125,000 to £250,000 (ie, £2,500) and 5% of the portion from £250,000.01 to £670,000 (ie, £21,000).
I live in Scotland. Are there any changes for me?
No – the Scottish Government has said there’ll be no changes to the Land and Buildings Transaction Tax system (the name given to stamp duty in Scotland).