What Is Stamp Duty For First-Time Buyers?

 

Being aware of all the hidden costs associated with buying a house is an absolute must – but it can be tricky if you’re a first-time buyer and have never gone through the process before. 

Doing as much research as you can before you start househunting will make everything a lot easier and make sure that there are no nasty surprises.

So, with this in mind, now’s the time to look into stamp duty to see if you’ll need to pay it or not.

What is stamp duty?

Quite simply, stamp duty is the tax you’ll need to pay if you buy land or property above a certain price.

This tax is applicable when you buy a freehold property, a new/existing leasehold, a property through shared ownership, or if you’re transferred land or property in exchange for payment (such as if you buy a share in a house or if you assume responsibility for a mortgage).

The thresholds changed on April 1st this year and you’ll only have to pay tax on the amount above the relevant threshold.

Stamp duty doesn’t apply to all properties, however, and if the home you’re interested in sells for £125,000 or less then you won’t have to pay this particular tax.

Do first-time buyers pay stamp duty?

If first-time buyers invest in a residential property that’s worth £500,000 or less, the stamp duty tax threshold is set at £300,000.

To be eligible for the first-time buyer stamp duty discount, the property in question will need to be your only or main residence, you must not have previously owned a freehold residential property, you do not currently have an existing leasehold interest and you have never owned or inherited a foreign property.

Note, as well, that if you’re buying a house with another person both people included in the application will need to be a first-time buyer if you want to enjoy the tax-related discounts.

Furthermore, if you’re not a UK resident and want to buy a house, you will need to have been in the country for 183 days in the year leading up to the purchase. Otherwise, it’s likely that you’ll be hit with a two per cent surcharge on stamp duty rates.

How do you pay stamp duty?

A stamp duty return will need to be filed, even if you don’t have to pay this tax. The good news is that you don’t usually have to do this and your solicitor will fulfil the obligation on your behalf.

They’ll send a payment to HMRC within 14 days of the purchase completion date and then make the payment for you.

If stamp duty is filed late, you may incur financial penalties so it’s always worth double checking that this is taken care of. 
Of course, this is only a quick guide so if you’d like to find out more about the house-buying process, get in touch with the BR Needham team today.