The Ultimate Guide to First Time Buyer Stamp Duty

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.

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.

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.

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.

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.