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The Ultimate Guide to First Time Buyer Stamp Duty

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    What You Need to Know About Stamp Duty

    When it comes to buying property, one of the most confusing aspects can be stamp duty.

    With the amount of stamp duty tax payable changing depending on location and property type, you may be overwhelmed with the available information.

    This can be especially true for first-time buyers.

    Not only do first-time buyers pay different levels of tax, but they also get some stamp duty relief in most UK countries.

    With this in mind, we have crafted an easy-to-understand comprehensive guide to first-time buyer stamp duty.

    This guide isn’t just for first-time buyers, though, with information on everything stamp duty, including a first-time buyer stamp duty calculator, current stamp duty rates in every UK country, how to pay stamp duty, and much more.

    Keep reading to learn all about stamp duty for first-time buyers.

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      What Is Stamp Duty and How Does it Work?

      Before we get started on the current rates of stamp duty for first-time buyers, let’s discuss exactly what stamp duty is.

      Stamp Duty Land Tax is a tax payable on the purchase price of a property in England and Northern Ireland.

      A similar tax is also paid in Scotland and Wales.

      However, it has a different name in both countries, being known as Land and Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales.

      While the names differ, so do the rates, as each home nation has different rules which we will address in a later section.

      Stamp Duty Land Tax or SDLT needs to be paid within 14 days of completing a property sale and needs to be paid by the party purchasing the property.

      Ever since 2014, the UK has had a progressive stamp duty rate system.

      This means instead of paying one rate on the total purchase price; you will pay differing rates on a certain proportion of the property price.

      For example, let’s say you purchase a property for £500,000.

      Under the current tax rates as of September 2023, you will pay 0% tax on the first £250,000 (£425,000 if you’re a first-time buyer) while paying 5% on the next £250,000.

      In this scenario, you would need to pay £12,500 within 14 days of purchasing your £500,000 property.

      It is important to note that tax rates differ for those buying additional properties in the UK that aren’t their primary residences, such as investors or landlords.

      Here, investors or landlords will typically have to pay an additional 3% charge on top of the normal SDLT rates.

      In the example provided, this would mean that instead of paying a 5% charge on the £250,000, you would need to pay 8%.

      So, as an investor, you will pay £20,000 in stamp duty land tax, while those buying a property to live as their first home would pay £10,000.

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      Stamp Duty Calculator First Time Buyer

      Looking for the easiest way to work out how much stamp duty tax you will pay on a property as a first-time buyer?

      Well, look no further than our free-to-use stamp duty calculator for first-time buyers.

      Just enter your purchase price to get an accurate and instant review of what you can expect to pay on the property.

      For a first-time buyer, stamp duty rates are slightly different, with first-time buyer stamp duty tax relief being better than those looking to avoid stamp duty on a second home.

      So, if you’re confused, just fill in your data below to get the easiest way to calculate your tax rates with the Stamp duty calculator for first-time buyers.

      First-Time Buyer Stamp Duty Calculator

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      The Stamp Duty Holiday

      Disclaimer: The stamp duty holiday has completely ended as of October 1, 2021. Click the link to learn more about the latest rates and what it means for the property market.

      As of July 2021, the main stamp duty holiday has ended.

      First implemented back in July 2020, the stamp duty holiday was introduced to help promote continued investment into the UK property market during the covid-19 pandemic.

      Here, buyers could save up to £15,000 on stamp duty, with the thresholds at which you start paying the tax increasing.

      It meant that those buying a home would only pay stamp duty on property worth over £500,000, while investors would need to pay just 3% on properties up to £500,000.

      However, while it has officially ended, there are still tax cuts available in England and Northern Ireland until October, although these rates are less generous.

      Despite the smaller generosity, stamp duty land tax for first time buyers is still excellent.

      Notably, these reduced rates aren’t available in Wales and Scotland, which saw its tax holiday ending in June and April, respectively.

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        Current Stamp Duty Tax Rates in England and Northern Ireland

        Despite the main stamp duty tax holiday ending in England and Northern Ireland, there are still savings to be made with reduced rates available between 23 September 2022 and 31 March 2025.

        Currently, those buying a primary residential property will not pay stamp duty on the first £250,000 of a property purchase.

        This is slightly different if you’re a first time buyer with stamp duty not due on the first £425,000 instead.

        This means until October, the stamp duty threshold for first time buyers is £425,000.

        So, if you’re asking “do you pay stamp duty as a first time buyer” the answer is yes, but only on property worth over £425,000 in England and Northern Ireland.

        However, this first-time buyer stamp duty threshold does not apply if the property you are buying costs more than £625,000 – if it does, you’ll pay the normal rate of stamp duty.

        It’s a bit confusing, isn’t it?

        And if that wasn’t enough of a headache, from 31 March 2025, these rates will change again, and regular stamp duty rates will return.

        Those buying an additional property to rent will pay an extra 3% charge on their purchases.

        Even if you’re a first time buyer choosing to rent your first property out, you will still pay the higher rate as you don’t intend to live in the property.

        Therefore, the first time buyer buy to let stamp duty rate is still an additional 3% charge.

        After 31 March 2025, the threshold when you start paying stamp duty will likely be reduced again to £125,000, while for a first time buyer the stamp duty threshold will be £300,000.

        This means a first-time buyer stamp duty relief will be even more beneficial come 2025, while normal buyers and investors will pay a lot more.

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        Stamp Duty Example: July 1 2021 to September 31 2021

        Imagine that three people are looking to buy a property in August 2021 in England worth £350,000.

        One is a first-time buyer, and another is buying a new home to live in after just selling their first-ever home. The last is a property investor looking to buy a property and rent it to a tenant for a profit.

        Each buyer will pay a different amount as per the latest tax rules in England.

        Stamp Duty First Time Buyer UK

        First up is the first-time buyer.

        Under the latest rules, the stamp duty threshold for first-time buyers is £300,000, compared to £250,000 for other buyers.

        This means that if a property is purchased for £350,000 by a first-time buyer, only £50,000 is subject to tax.

        So, a first-time buyer will pay a 5% charge on that £50,000, meaning the total stamp duty tax payable is £2,500.

        Those Buying a Main Residence in the UK

        Next, we have a buyer buying a new home to live in, but they aren’t a first-time buyer.

        Here, those buying a new main residence will have a stamp duty threshold of £250,000.

        This means if a buyer is purchasing a £350,000 home, the remaining £100,000 will be taxable at a 5% rate.

        Therefore, the total tax payable is £5,000 – double that of a first-time buyer.

        Buy-to-Let Investor

        Our final example of a property buyer under the current tax rates is a buy-to-let investor.

        While the thresholds for buy-to-let investors are the same as those buying a main residence, the tax rates aren’t.

        Those buying additional properties in England and Northern Ireland will need to pay an additional 3% charge.

        So, not only is there a 3% charge on the first £250,000, but there is also an 8% charge on the remaining £100,000.

        Therefore, buy to let investors would pay a total SDLT of £15,500 – over £10,000 more than a normal residential buyer.

        These rates get even more pricey from October, which is why it is vital to make your purchase before the deadline.

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          Stamp Duty Example: September 2022 to 31 March 2025

          Now that we’ve looked at an example under previous rates let’s use the same three people to see how much tax each will pay in 2024.

          In this example, the three buyers are buying a property worth £350,000 in England.

          Stamp Duty First Time Buyer UK

          The stamp duty threshold for first-time buyers is £425,000, while for others, it is £250,000.

          So, on a property purchase worth £350,000, a first-time buyer won’t have to pay stamp duty!

          Their effective stamp duty rate is 0.00%.

          Those Buying a Main Residence in the UK

          While first-time buyers will see no stamp duty tax on a property worth £350,000, the same cannot be said for those buying a main residence in the UK, which isn’t their first home.

          In this example, a buyer will not pay stamp duty on the initial £250,000.

          However, the buyer will pay 5% on the portion from £250,001 and £350,000.

          This means that those buying a main residence will pay an SDLT rate of £5,000

          Buy-to-Let Investor

          Finally, a buy-to-let investor will pay a 3% extra charge on each threshold of the purchase.

          This means a buy to let investor will pay a 3% charge on the first £250,000 of the property (£7,500), before spending an 8% charge on the next £250,000 (£8,000).

          All in all, this means a buy to let investor buying a property post-October will pay a total of £15,500.

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          Stamp Duty in Scotland and Wales

          While up to this point we’ve been explicitly talking about stamp duty tax in England and Northern Ireland, there is also Scotland and Wales to consider.

          These home nations have different forms of stamp duty with different rates and names. However, it works almost identically to the stamp duty seen in England.

          Land and Buildings Transaction Tax in Scotland

          As of 2015, reforms in Scotland changed Stamp Duty to its current form as Land and Buildings Transaction Tax or LBTT for short.

          Despite the name change, though, the system works exactly the same as in England and Northern Ireland, except the thresholds applicable are different.

          If you’re buying a home in Scotland, you’ll pay Land and Buildings Transaction Tax (LBTT) on properties costing more than £145,000.

          Another difference is how buy-to-let investors will pay for the tax.

          If you’re buying an additional property, you might need to pay an extra 4% on the total purchase price of the property, as well as the standard rates of LBTT that may apply.

          You can also receive first-time buyer relief if you buy a property which you intend to live in as your only or main residence.

          A first-time buyer will need to meet certain criteria to qualify for the tax relief. You can find the full criteria on the Revenue Scotland website.

          If you qualify, you will not pay LBTT for properties up to £175,000.

          If your first-time purchase is for a property that costs more than £175,000, like Stamp Duty,  you’ll only pay tax on the portion of the price above £175,000.

          There’s no upper limit, so whatever the price of your property, you’ll still be eligible for the first £175,000 of the price.

          First Time Buyer Stamp Duty Scotland

          Looking at the data, let’s use an example to see exactly how much you would expect to pay as a first-time buyer in Scotland.

          So, let’s say a first-time buyer was set to buy a property worth £200,000 in Glasgow in 2024.

          They would pay zero tax on the first £175,000, but would 2% on the remaining £25,000.

          This means their Land and Buildings Transaction Tax would be £500.

          Land Transaction Tax in Wales

          Changed in 2018 to Land Transaction Tax or LTT, Wales has a similar system to the rest of the UK nations.

          However, perhaps the most notable difference is that there is no stamp duty relief for first-time buyers in Wales.

          There is also a 4% additional charge for buy to let investors and additional property buyers.

          If you’re buying a home in Wales, you will pay Land Transaction Tax (LTT) if the property costs more than £225,000, up from the previous threshold of £180,000.

          If you’re buying an additional property, you will need to pay the higher residential rates for each band.

          First Time Buyer Stamp Duty Wales

          So, what if you’re a first-time buyer looking at Stamp Duty in Wales?

          Using a practical example, a first-time buyer purchasing a £350,000 property in Wales will not pay any LTT up until £225,000.

          The remaining £125,000 is subject to a 6% tax rate, meaning a first-time buyer in Wales will pay £7,500 on a property worth £350,000.

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            How to Pay Stamp Duty?

            Now that you understand current stamp duty rates and how much to expect to pay, it’s time to address paying stamp duty.

            For those buying property in England and Northern Ireland, you will have just 14 days from the date of completion to pay the stamp duty costs.

            This means from the date the contracts are signed and the keys are exchanged.

            While you can take longer to make the payment, you can face fines and extra interest, so it’s best avoided.

            It’s important to note that while your solicitor will likely sort the process for you and tell you to pay, it is your legal responsibility to pay the tax.

            Paying stamp duty and its alternatives in Scotland and Wales have different processes.

            If you want to learn the full process, read the following three sections.

            Paying Stamp Duty in England and Northern Ireland

            The process for paying stamp duty is quite simple.

            Firstly, you will need access to your unique transaction reference number, which is 11 characters long and found on either the online submission receipt or on the paper stamp duty return.

            After this, you can transfer the money online to HM Revenue & Customs or pay using a debit card, cheque, or cash in banks and post offices – the latter will need you to provide a payslip.

            For more details on paying stamp duty, check out the official government website.

            Paying Land and Buildings Transaction Tax in Scotland

            Paying LBTT in Scotland differs from Stamp Duty in England.

            The first major difference is you won’t be paying HM Revenue & Customs and will instead pay Revenue Scotland.

            Also, unlike England and Northern Ireland, you will have 30 days to pay your tax rather than two weeks.

            However, like in England, the process is simple.

            First, submit an online return to register the transaction on the Revenue Scotland website.

            At the end of the return, you will get a receipt with a 13-character transaction reference number.

            Then you will just need to pay the stamp duty, which you can do by phone, online, or via cheque.

            Find out how to pay LBTT in Scotland using the following link.

            Paying Land Transaction Tax in Wales

            Once again, the process is almost identical to the other three countries, except payments will go to the Welsh Revenue Authority.

            Like Scotland, you will also be given 30 days after completing your purchase to pay the applicable tax.

            Firstly, submit a return registering the transaction on the WRA site.

            Next, find your unique transaction reference number that will be sent to you after the WRA processes your return.

            Then, like the other countries in the UK, you can pay with your phone, online, or via cheque (although this is limited right now due to covid).

            For more information, check out the Welsh government website to learn how to pay LTT.

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              Can You Use Your Mortgage to Pay Stamp Duty?

              As we’ve seen in some of our example calculations, stamp duty can get pricey depending on the purchase price.

              If you don’t have the money to hand, you may be wondering whether you can use or extend your mortgage to cover the costs of stamp duty.

              While the simple answer is yes, it can muddy the waters somewhat if you opt for this route.

              The first thing to realise is you will obviously require a bigger loan, which means more debt.

              For instance, if you need an extra £5,000 on a 5% interest mortgage on a 25-year term, you could pay an additional £8,500 through interest.

              Secondly, and perhaps most importantly, this extra loan can impact your loan-to-value.

              LTV is the measurement of how much of a property’s value you intend to borrow.

              Usually, an LTV of 60% is required to get the best mortgage deals. However, if you loan more money, this can increase your LTV.

              This guide isn’t financial advice, and your circumstances may be very different.

              For this reason, be sure to speak to a mortgage broker or adviser to ensure you make the right decision for your own situation.

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              FAQs

              So, is stamp duty-free for first-time buyers?

              The answer is no; stamp duty isn’t completely free for first-time buyers.

              However, if you are a first-time home buyer, stamp duty starts at a higher threshold of £425,000.

              This means stamp duty is free if you buy a property below £425,000.

              The price of stamp duty in the UK depends on the purchase price of a property and what you are purchasing the property for. If you are buying a property to rent to others or as a non-main residence, you will pay higher rates than a residential buyer.

              In England and Northern Ireland, you have 14 days to pay stamp duty after you have completed your property purchase and got the keys. In Scotland and Wales, you have 30 days.

              Yes, you will need to pay stamp duty if the value of a property exceeds £250,000 in England and Northern Ireland. For first-time buyers, this figure is higher at £425,000.

              With the average property price valued at £250,772 in the UK, according to the Land Registry, you may have to pay a small amount of Stamp Duty tax.

              You have to pay stamp duty tax within 14 days of completing your property purchase in England and Northern Ireland. This increases to 30 days if you bought a property in Scotland or Wales.

              Anyone purchasing a property in the UK is liable to pay stamp duty if the property value exceeds a certain threshold. In England and Northern Ireland, this threshold is £250,000, or £425,000 if you’re a first-time buyer.

              In Wales, this threshold is £225,000. Whereas, in Scotland, the threshold is £145,000, or £175,000 if you’re a first-time buyer.

              So, is stamp duty-free for first-time buyers?

              The answer is no; stamp duty isn’t completely free for first-time buyers.

              However, if you are a first-time home buyer, stamp duty starts at a higher threshold of £425,000.

              This means stamp duty is free if you buy a property below £425,000.

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              We hope you enjoyed our ultimate guide to first-time buyer stamp duty!

              If you want to learn more about the world of stamp duty, be sure to check out our latest stamp duty guide.

              Alternatively, we also have in-depth guides on taxes involved with buying property, so you are completely ready to invest in the property world.

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              Chat to an agent today to secure your dream property. Or, if you’re looking to improve your knowledge, be sure to check out our simple guide to stamp duty on buy-to-let property.

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              Author

              Dale Barham

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              Dale is a property news and onsite content writer at RWinvest.

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