A guide on Stamp Duty for first time buyers

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A house in the UK with Stamp duty

Stamp Duty Land Tax (SDLT) is a tax that must be paid when purchasing a property in the UK.

For many first-time buyers, understanding the intricacies of stamp duty can be a daunting task, especially with changes to the rates of Stamp Duty recently coming into effect.

Stamp duty for first time buyers

As of 23rd September 2022, first-time buyers in the UK have seen significant changes to the stamp duty rates.

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Currently, first-time buyers are exempt from paying stamp duty on the first £425,000 of any property purchase and will pay 5% for anything over this £425,000 amount.

Here is this how this will look on the purchase of a £500,000 property.

Property Value Portion Stamp Duty Rate Calculation Stamp Duty Amount
≤ £425,000 0% £425,000 × 0% £0
£425,001 – £500,000 5% (£500,000 – £425,000) × 5% £3,750
Total Stamp Duty Due £3,750

The breakdown of SDLT for a first time buyer in this example:

  • £0 on the first £425,000 of the property value
  • 5% on the remaining £75,000 (£500,000 – £425,000), which equals £3,750

Therefore, the total stamp duty owed by a first-time buyer for a £500,000 property purchase would be £3,750.

Stamp duty for first time buyer non-UK residents

In cases where a transaction is designated as a ‘non-resident transaction’, an additional 2% surcharge is levied atop existing residential rates of Stamp Duty Land Tax (SDLT).

These rates include those applied to zero rates, as well as rates applicable to all buyer categories, including first-time buyers. So the SDLT rates for non-UK residents then become:

Property Value Portion Stamp Duty Rate
≤ £425,000 2%
£425,001 – £500,000 7%

If you are a first-time buyer purchasing a property worth £425,000 or less, you will not need to pay any stamp duty.

Who pays Stamp duty?

Stamp Duty Land Tax (SDLT) is a tax that must be paid when purchasing a property in the UK by the buyer.

The amount of stamp duty owed can be confusing, as the rates vary depending on the type of buyer, the purchase price of the property, and the date of the transaction.

A property in the Unitd Kingdom bought with a buy to let stamp duty rate not a first time buyer stamp duty rate

In this article, we will focus on the current stamp duty rates for first-time buyers, taking into account the recent changes that came into effect on 23rd September 2022.

How to calculate the stamp duty you owe

Calculating the stamp duty you owe on a property purchase is a crucial step in the home-buying process.

Visit our Stamp Duty calculator to calcualate what you owe

It’s essential to determine the amount of stamp duty you’ll need to pay early on, as this will help you budget for the total costs associated with your purchase. Here’s a step-by-step guide on how to calculate your stamp duty:

A calculator being used to calculate the amount of stamp duty owed
  • Determine the purchase price of the property.
  • Identify your buyer status (e.g., first-time buyer, moving from first home, buy-to-let investor, or second homeowner).
  • Refer to the current stamp duty rates for your buyer status and the purchase price of the property.
  • Calculate the stamp duty owed for each portion of the property value according to the corresponding tax rate.
  • Sum up the stamp duty amounts for each portion to determine the total stamp duty owed.

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It’s advisable to calculate your stamp duty as soon as you have a clear idea of your budget and the type of property you want to purchase. This will help you factor in the additional costs and avoid any surprises later in the process.

How first time buyer SDLT compares to other stamp duty rates

In addition to the rates for first-time buyers, it’s essential to understand the stamp duty rates for other types of property purchases so you understand how beneficial these first time buyer Stamp Duty rates actually are.

How SDLT for first time buyers compares to those buying a second home

The current stamp duty rates for buyers moving from their first home and keeping ownership of their first home or buying a buy to let are:

Property Value Second home SDLT First time buyers
£0 – £250,000 0% 0%
£250,001 – £925,000 5% 5% (After £425,000)
£925,001 – £1.5 million 10% 5%
Above £1.5 million 12% on remaining amount 5%

How SDLT compares to those buying a Buy to Let

Buy-to-let investors and second homeowners are subject to different stamp duty rates compared to those purchasing a primary residence. Since April 2016, these buyers have been required to pay an additional 3% stamp duty surcharge on top of the standard rates.

Property Value Stamp Duty Rate First time buyers
£0 – £250,000 3% 0%
£250,001 – £925,000 8% 5% (After £425,000)
£925,001 – £1.5 million 13% 5%
Above £1.5 million 15% on remaining amount 5%

Stamp duty on land and freehold purchases compared to first time buyer purchases

These rates correspond to the Stamp Duty Land Tax (SDLT) levied on freehold sales and land transactions. These rates are also fairly low compared to other types of SDLT.

Property Value or Lease Premium SDLT Rate First time buyers
Up to £150,000 0% 0%
The next £100,000 (portion from £150,001 to £250,000) 2% 0%
The remaining amount (portion above £250,000) 5% 5% (After £425,000)

Stamp duty for those replacing their first and only primary residence

As of 23rd September 2022, buyers replacing their primary residence will pay the same stamp duty rates as first-time buyers.

This means that there is no difference in the amount of stamp duty owed, regardless of whether you are a first-time buyer or moving from your first home.

Why is first time buyer stamp duty lower than other types of purchases?

First-time buyers in the UK benefit from more favourable stamp duty rates compared to other types of property buyers.

The government has historically recognised the challenges faced by first-time buyers entering the property market and has implemented measures to help alleviate some of the financial burdens associated with purchasing a first home.

A man who couldn't afford a home before the stamp duty changes

In the past, stamp duty exemptions and discounts for first-time buyers have varied.

In contrast, those moving from their first home, buy-to-let investors, and second homeowners do not receive the same level of support. These buyers are expected to have more financial stability and are therefore subject to higher stamp duty rates.

The additional 3% surcharge on second homes and buy-to-let properties, introduced in April 2016, further demonstrates the government’s intention to prioritise first-time buyers and discourage the acquisition of multiple properties.

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