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Stamp Duty – What Does It Mean For First-Time Buyers

Stamp Duty - phone with the calculator open on top of papers

There is the price of your new dream home and there are those hidden extra costs that you only find out once you start looking into house-buying. One such cost is called the Stamp Duty (Land and buildings transaction tax in Scotland and Land transaction tax in Wales). 

Lucky for you, we are going to cover everything you need to know about this in this handy guide.

England: Stamp Duty

In England, the name of the tax you pay after purchasing a property is Stamp Duty Land Tax (SDLT) or Stamp Duty for short. 

England Stamp Duty

What exactly is the Stamp Duty?

Stamp Duty is the tax that you pay after purchasing land or property. It is a progressive tax meaning that the tax rate rises as the taxable amount rises. You might pay more tax on one part of the house price if the total price exceeds a certain amount. 

Taxes always dampen the excitement of purchasing something awesome. Fortunately, there are some exemptions from this particular tax. And what is better, first-time buyers benefit here as well.

Are you exempt from the Stamp Duty as a first-time buyer?

Due to the pandemic, the Government issued a Stamp Duty holiday. First-time buyers are exempt from the Stamp Duty for houses priced below £500,000. The deadline is fast approaching though – this amazing deal will only be available until 30 June 2021. 

After this date, the regular rates will apply for people wanting to make their first move on the property ladder. First-time buyers will need to pay the Stamp Duty on houses priced above £300,000.

See our summary below on how much Stamp Duty you need to pay as a first-time buyer before and after the deadline.

  • Before 30 June 2021

You don’t need to pay Stamp Duty on the first £500,000 of the primary residential home you wish to purchase

Example: You set your eyes on a property that costs £490,000. The tax is on the Government this time. Until the end of June, you don’t have to pay any Stamp Duty. 

  • After this date

The Stamp Duty is set to go back to the pre-COVID rates. First-time buyers are exempt from paying tax on the first £300,000 of the house price.

Example: You still want the same £490,000 house but due to mixups at the bank, you can only buy it in July. This means that now you do need to pay. The Stamp Duty will be calculated on £190,000 (= £490,000 – £300,000) as you are a first-time buyer.

For the exact rates and bands of the Stamp Duty, visit the relevant page of the UK Government.

Are there additional requirements you need to fulfill?

You need to consider some extra limitations after the 30 June deadline passes. The property that you wish to purchase needs to be your main residence. This means that you cannot buy the house and then rent it out later. 

Do you want to purchase your dream home with your hubby or wife? You need to be mindful of more limitations then. If you are planning on buying the house as a married couple, both of you need to qualify as a first-time buyer. 

Scotland: Land and buildings transaction tax

In the land of Nessie, you also need to pay an additional tax after purchasing your home. This cost is called the Land and buildings transaction tax – the name itself is on the scarier side… However, first-time buyers can expect some relief from the government here as well.

Scotland Stamp Duty

What exactly is the Land and buildings transaction tax?

The idea here is the same as with England’s Stamp Duty. The Land and buildings transaction tax is also paid after buying a property or land. As this is a progressive tax as well, you only need to pay it if the purchase price is more than a specific amount. This cut-off is £175,000 for first-time buyers and £145,000 for others. 

Are you exempt from the Land and buildings transaction tax as a first-time buyer?

First-time buyers do benefit from the Land and buildings transaction tax relief. However, in Scotland, the amount after which you need to pay this tax is much lower than in England. 

If the property you want to purchase is the first one that you will own, you will only be charged the tax on the amount exceeding £175,000. This means that if your dream house costs £225,000, you have to pay Land and buildings transaction tax after £50,000 (= £225,000 – £175,000).

To see the most up-to-date rates and bands, visit the website of Revenue Scotland.

Are there additional requirements you need to fulfill?

The most important condition you need to meet to qualify for the relief is that the house you want to purchase will be your main residence. 

If you are buying the property with a partner, both of you need to be first-time buyers and meet the previous requirement as well.

Wales: Land transaction tax

In Wales, the tax you pay after buying your new home is called Land transaction tax.

The tax works very similarly to England’s Stamp Duty. For example, Welsh home buyers also get a holiday extension from the tax until 30 June 2021. 

Wales Stamp Duty

What exactly is the Land transaction tax?

The Land transaction tax is paid after you purchase a property or land. It is a progressive tax, meaning that you only pay after a certain part of the purchase price. The rate of the tax increases as the taxable amount rises.

Are you exempt from the Land transaction tax as a first-time buyer?

Yes, and for the time being, the terms of the Land transaction tax are very tempting. 

If you are looking to buy a home (first-time buyer or not), you don’t have to pay Land transaction tax on the first £250,000 of the house price until the end of June 2021. However, this is a temporary exemption. The Government’s aim with it is to help the property market during the COVID pandemic. 

After July comes around, the nil rate for first-time buyers goes back to £180,000.

Check out the paragraphs below to see how you need to pay the Land transaction tax before and after the deadline of the holiday.

  • Before 30 June 2021

You don’t need to pay land transaction tax on the first £250,000 of the price for the property you want to buy

Example: Browsing through Getting On The Ladder, you spot a house that costs £240,000. Until the end of June, you don’t have to pay any land transaction tax.

  • After this date

Unfortunately, the land transaction tax is set to go back to the pre-COVID rates. This means that the nil-rate threshold will decrease. First-time buyers still benefit though. They are exempt from paying tax on the first £180,000 of the house price

Example: You still have your eyes set on the same £240,000 house but due to mixups at the bank, you can only buy it in July. In this case, you do need to add the Land transaction tax to your other house-buying costs. However, you only pay the tax on £60,000 (= £240,000 – £180,000) as a first-time buyer.

Visit the Welsh Government website for more info about the exact rate.

Are there additional requirements you need to fulfill?

The same eligibility criteria apply here as in England. Both you and any potential partner you want to purchase the house need to be a first-time buyer to qualify for the rates after the 30 June 2021 deadline. Furthermore, the house you wish to buy needs to be your primary residence. 

Summary

When you are calculating the costs of buying your first house, the taxes are something that you, unfortunately, cannot ignore. There is some relief though you can expect to get as a first-time buyer. The amount of help you can expect depends largely on your budget and the price of the house you want to make an offer on.

Want to take advantage of the Stamp Duty aid as a first-time buyer? Browse our properties now. We have amazing houses waiting to be your very first own home.

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