Stamp Duty for First-Time Buyers
The idea is that stamp duty is applied progressively, so you won’t pay a fixed percentage tax on the entire cost of the home. Instead, you pay the appropriate tax rate as a first-time home buyer based on the value.
In England, the rates are:
|
Proportion of the Property Value
|
Stamp Duty
|
|
£250,000 or below
|
0%
|
|
£250,001 to £925,000
|
5%
|
|
£925,001 to £1.5 million
|
10%
|
|
Above £1.5 million
|
12%
|
Stamp duty for first-time buyers differs because your threshold, below which you pay nothing, is £300,000 – that extra £50,000 tax-free allowance is the first-time buyer stamp duty threshold.
Eligibility for First-Time Buyer Stamp Duty
To qualify for the reduced stamp duty for first-time buyers, you must not have owned any residential property before in any country. That includes inherited or gifted homes and all parties on the application.
If you buy a home with a partner, for example, and they have owned a home before, or you have had a rental property, you will be unable to pay the reduced stamp duty for first-time buyers.
Any first-time home buyer in England must pay the applicable stamp duty within two weeks of the completion date. It is important to pay your first-time buyer stamp duty on time to avoid a fine or penalty.
However, in most cases, your solicitor will deal with the stamp duty for first-time buyer clients on your behalf and manage the transaction at the same time as transferring the funds from your mortgage lender.
In any case, it is your responsibility as a first-time home buyer to remit the tax owing, so it’s essential you calculate the amount of stamp duty for first-time buyers you need to pay and clear the obligation within 14 days.
Adding Stamp Duty to Your First-Time Home Buyer Mortgage
Many first-time home buyer applicants want to add the stamp duty to their mortgage – this may be viable if you do not have the funds to otherwise clear the amount owed. That does mean that your first-time buyer stamp duty charge will add to the amount you repay over time on your mortgage.
You should also consult an independent broker to ensure your mortgage is still affordable and compliant with the lender’s terms since you will need to cover the full amount plus your mortgage borrowing.
For example, if you are a first-time home buyer and want to purchase a property worth £350,000, your stamp duty will be £2,500. If you already have a first-time home buyer deposit of £50,000, adding the extra £2,500 to your first-time home buyer mortgage means your LTV rises from 85% to 86%.
A first-time home buyer lender with an LTV cap of 85% might refuse the slightly higher application value simply because it exceeds their lending policies for first-time home buyer applicants.
Other Mortgage Costs a First-Time Home Buyer Should Consider
Alongside first-time buyer stamp duty, you should ensure your calculations include all the additional costs associated with taking out a mortgage as a first-time home buyer.
Factors such as product charges, early exit penalties, application fees, brokers’ commissions, valuations and moving costs will all affect your overall mortgage value and the additional fees you pay as a first-time home buyer.
For more information about first-time buyer stamp duty and other mortgage costs, please contact the Revolution Finance Brokers team at your convenience.
Our experienced consultants work with first-time home buyer applicants across the UK and can recommend the right mortgages and options, whether or not you are liable to pay stamp duty for first-time buyers.
2023-05-09 
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