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Stamp duty changes for first-time buyers

Stamp duty changes for first-time buyers

On Friday, 23rd September, chancellor Kwasi Kwarteng announced permanent stamp duty cuts for home-buyers in the government’s ‘mini-budget’. This will result in savings when buying your new home and will particularly benefit first-time buyers.

What is stamp duty?

Stamp duty is a tax payable to the government when you buy a home, or land, priced above a certain threshold.

To help people get on to the property ladder, the threshold at which the tax falls due for first-time buyers has been increased from £300,000 to £425,000.

The chancellor also increased the property’s value on which first-time buyers can claim stamp duty relief from £500,000 to £625,000.

What are the new stamp duty rates?

Following the latest announcement, first-time buyers will now have to pay:

  • no SDLT up to £425,000
  • 5% SDLT on the portion from £425,001 to £625,000

You’re eligible if you and anyone else you’re buying with are first-time buyers.

If the price is over £625,000, you cannot claim the relief.

Instead, the new stamp duty rates for those buying a property to live in are:

  • £0 – £250,000 (£425,000 for first time buyers) = 0%
  • £250,000 – £925,000 = 5%
  • £925,000 – £1,500,000 = 10%
  • £1,500,000+ = 12%

For example,

If you are a first-time buyer and purchase a property for £500,000, the SDLT you owe will be calculated as:

  • 0% on the first £425,000 = £0
  • 5% on the remaining £75,000 = £3,750
  • total SDLT = £3,750

Under the changes announced by the chancellor, anyone spending £250,000 on a property will avoid £2,500 in stamp duty charges as it was previously charged at 2% between £125,000 and £250,000.

How does stamp duty work for Shared Ownership?

When you buy a share in a property through an approved shared ownership scheme, you may have to pay SDLT. There are 2 ways to pay:

  • make a one-off payment based on the total market value of the property
  • pay any SDLT due in stages

If you decide to make one-off payment upfront, this is making a ‘market value election’ for SDLT.

If you choose to pay SDLT in stages, you pay anything that’s due on the first sale amount. But then you don’t make any further payments until you own more than an 80% share of the property.

You can choose which option’s best for you, depending on your circumstances.

Stamp Duty calculator

You can use the Stamp Duty Land Tax calculator here.

If you’re considering buying a property, look at our available apartments and get on the property ladder today!