First-time buyer relief may reduce the stamp duty land tax (SDLT) that a first-time buyer pays when they buy their first home in England or Northern Ireland. A similar scheme applies in Scotland for Land and Buildings Transaction Tax (LBTT), but there is no first-time buyer relief from Land Transaction Tax in Wales. This articles focuses only on the SDLT relief.ย
Higher residential thresholdย
The SDLT relief for first-time buyers takes the form of a higher residential threshold. The normal residential threshold is ยฃ125,000. However, this is increased to ยฃ300,000 for first-time buyers buying their first home costing ยฃ500,000 or less.ย
Where the relief applies, no SDLT is charged on the first ยฃ300,000 of the purchase consideration, with the balance of the consideration (up to ยฃ500,000) liable to SDLT at 5%. Where the consideration is more than ยฃ500,000, the relief does not apply; first-time buyers pay SDLT as for other buyers to the extent that the consideration exceeds ยฃ125,000.ย
Example 1ย
Betty is a first-time buyer. She buys her first property, a 2-bed house, in June 2022 for ยฃ280,000, which she will live in as her main home. As the consideration is less than ยฃ500,000, first-time buyer relief applies. The consideration is below the SDLT first-time buyer threshold of ยฃ300,000, so Betty does not have to pay any SDLT.ย
Example 2ย
Libby also buys her first home in June 2022. The property costs ยฃ350,000. She too benefits from SDLT relief. No SDLT is payable on the first ยฃ300,000, but SDLT at 5% is payable on the remaining ยฃ50,000. She therefor pays SDLT of ยฃ2,500.ย
Example 3ย
Eliza buys her first home, a flat in London, in June 2022. The flat costs ยฃ700,000. As the consideration is more than ยฃ500,000, she is unable to benefit from first-time buyer relief. Consequently, she must pay SDLT of ยฃ25,000 ((ยฃ125,000 @ 0%) + (ยฃ125,000 @ 2%) = (ยฃ450,000 @ 5%)).ย
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Buying an investment propertyย
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In areas such as London, where property prices are high, many would-be first-time buyers are unable to afford a property. Further, where the price is more than ยฃ500,000, first-time buyer relief is not available.ย
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To overcome some of these difficulties and to get onto the first rung of the ladder, an option may be to buy an investment property in a cheaper area. However, for first-time buyers wishing to take advantage of first-time buyer relief to cut their SDLT bill, there is a sting in the tail โ the relief is not available unless the first-time buyer intends to occupy the property as their only or main residence. Consequently, first-time buyers buying an investment property to enable them to get on the property ladder must pay SDLT at the usual rates where the consideration exceeds ยฃ125,000.ย ย
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First-time buyer relief is not available to all first-time buyers โ only to those who are buying their first property for ยฃ500,000 or less to live in as a main home.
Partner note: FA 2003, s. 57B and Sch. 6ZA.ย
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