Buying your first home is fantastic but also a little terrifying! You might be a like me (or not)! Either way, I tend to get more excited about things I’m never going to buy! But when it comes to a big purchase, I tend to get serious (not less enthusiastic) as I know it’s a big deal! A significant transaction has my full attention, and I want to make sure it’s right! Understanding the stamp duty latest rules is one of many important considerations that you need to make! Read on to find out the most recent 2020 rules and regulations for First Time Buyer Stamp Duty!
First Time Buyer Stamp Duty overview
Stamp duty land tax is paid when you buy property or land over a specific value.
It also differs depending on whether you are buying in England, Wales or Scotland.
In recent years there have been many changes with stamp duty, particularly for first-time buyers. Of course stamp duty isn’t the only consideration, so make sure you head over to our First Time Buyer Mortgage section where we have lots more helpful insights and calculators.
Do First Time Buyers Pay Stamp Duty?
The short answer is yes and no, as it all depends on the price of the property!
Currently first time buyers pay less or no stamp duty on properties which are £500,000 or less. For properties above £500,000, first-time buyers will pay the standard rates of tax, and there is no first-time buyer stamp duty relief.
For properties which are £300,000 or less, there is no stamp duty for first-time buyers.
For properties which are between £300,000 and £500,000, the stamp duty is only applicable to anything over £300,000. In other words, there is a nil rate of stamp duty up to and including £300,000 then a 5% rate on anything over this figure up to the £500,000 threshold.
This would mean a first-time buyer purchasing at £350,000 would pay no tax on the first £300,000 and 5% on the £50,000, which equals £2,500.
First Time Buyer Stamp Duty Recent Changes
Stamp duty for first-time buyers has seen considerable changes in recent years.
All of which were designed to help and encourage first-time buyers to get on the ladder!
This all started on 22nd November 2017 when the stamp duty relief was introduced for first time buyers for properties under £500,000.
Historically first-time buyers have occasionally been given stamp duty benefits with the most recent from 25th March 2010 until 1st January 2012 when it was taken away. During this time, first-time buyers benefited from no stamp duty for properties up to £250,000.
This new benefit for first-time buyers is a real boost for them and should not be underestimated or taken for granted. It’s highly likely it won’t be around forever.
First Time Buyer Stamp Duty in 2020
What is the outlook for first-time buyer stamp duty in 2020?
There is no indication that it is going to change anytime soon. Particularly as the current government have a strategy to help first-time buyers.
Having said that, a new budget or a new chancellor could look to make changes which might affect first-time buyers.
How much is Stamp Duty for a First Time Buyer?
We are currently building our first-time buyer stamp duty calculator.
Still, for now, I would suggest heading over to the government website. Here you will be able to enter your information and find out exactly how much you will pay.
Remember, the amount of stamp duty for a first-time buyer is always based on the value of the property.
How is First Time Buyer Stamp Duty Paid?
If you are wondering how you pay the stamp duty, don’t worry, it’s not something you technically have to do.
When you get a quote from a solicitor, it will usually not only include their fee but other costs and fees. These will consist of the charges for the various ‘searches’ that are required and the stamp duty.
The solicitor who manages the legal transaction of the purchase will also be dealing with the stamp duty.
You have to make sure you have the money to give to the solicitor when they ask for it!
When is First Time Buyer Stamp Duty Paid?
The solicitor will ensure they have all funds that are required for you to purchase the property.
This will include your deposit and the mortgage (assuming you need one), plus all of the other costs and associated fees such as stamp duty.
The solicitor will liaise with you when they need money for the stamp duty, which usually will be towards the end of the process once everything is nearing exchange and completion.
If you would like to know more about exchange and completion, then the Ultimate First Time Buyer Guide which will help answer all your questions.
Does First Time Buyer Stamp Duty Apply to Shared Ownership?
There is no stamp duty on properties up to £500k provided you only purchase under 80% of the value of the property.
However, watch out for staircasing above this level, particularly if you increase your share several times up to 100%.
Each time the stamp duty is recalculated, and if the property has risen in value, it will mean you will have paid more than if you had paid all of the stamp duty at the outset.
When you buy a shared ownership property, you do have the choice to pay the entire stamp duty upfront based on the current market value or pay it in stages as you buy more shares.
Paying for it upfront avoids the risk of the amount of stamp duty you pay going up as the property also goes up in value. However, it means finding more money at the outset.
Don’t forget every time you buy more shares in the property and increase your ownership. You not only have the potential to pay stamp duty, but you will also incur more fees and solicitors costs.
This means it makes sense to staircase as few times as possible. So rather than staircasing from 40% ownership to 80%, then 90%, then 100%. If you can reduce those steps by taking bigger jumps, it will hugely reduce your overall cost.
Can I add Stamp Duty to my first time buyer mortgage?
No, you can’t add stamp duty to your first-time buyer mortgage.
You have to use your savings or funds from legitimate sources (earnings, savings, a gift from family) to pay the first time buyer stamp duty.
So whether you use part of your deposit or you save the money in a separate pot, that will be your decision.
You certainly can not add the stamp duty onto a mortgage!
Who counts as a First Time Buyer?
Common sense suggests this is a bit of a silly question.
You either have owned a property before, or you haven’t!
But there are sometimes circumstances which make this a common question for people who are unsure (or who are trying to circumnavigate the rules!).
If I inherited a property am I still a first time buyer?
Unfortauley if you inherit a property you are no longer classified as a first-time buyer for stamp duty purposes.
Although you have never bought a property, you have inherited one, which means you now own it and are therefore no longer a first-time buyer.
I own a share in another property am I still a first time buyer?
If you own a share in another property, even if you have never lived in it. You are not classified as a first-time buyer for stamp duty purposes.
If I buy a property with someone else who isn’t a first time buyer, can I still get first time buyer stamp duty relief?
If you are a first-time buyer and you are buying with someone who isn’t. Unfortunately, this will mean you do not qualify for any first-time buyer stamp duty relief.
As you are buying as a couple, the ‘couple’ are not first-time buyers as one of you have owned before.
Can I use my help to buy ISA bonus to pay the first time buyer stamp duty?
No, the help to buy ISA bonus payment can not be used to pay stamp duty or any other costs associated with the purchase of your first home.
The bonus can only be used for the deposit.