Stamp Duty for First Time Buyers Explained
Looking to buy a property for the first time? Do you know whether or not you need to pay stamp duty? Recent changes to the rules have changed things since lockdown so here’s a quick guide stamp duty for first time buyers.
What is Stamp Duty?
You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England and Northern Ireland.
You pay the tax when you:
- buy a freehold property
- buy a new or existing leasehold
- buy a property through a shared ownership scheme
- are transferred land or property in exchange for payment, for example, you take on a mortgage or buy a share in a house
How Much Do You Pay?
The recent Coronavirus situation has changed the Stamp Duty threshold to encourage more buyers into the market.
Until 31 March 2021, there will be no Stamp Duty on the purchase of your main property costing up to £500,000.
These rules will change on April 1st, 2021 to the following;
- £125,000 for residential properties
- £150,000 for non-residential land and properties
These thresholds are the same as they were before 8 July 2020.
When are you exempt from Stamp Duty?
There are other circumstances in which Stamp Duty is either not payable or can be reduced:
Slightly over rate band. If the price is only just within a higher band, ask the seller or estate agent if they would accept a slightly lower price.
Transfer of property in separation or divorce. If you’re divorcing or separating from your spouse or partner, there’s no Stamp Duty to pay if you transfer a proportion of your home’s value to them. Read more in our guide Protecting your homeownership rights during divorce or dissolution.
Transfer of deeds. If you transfer the deeds of your home to someone else – either as a gift or in your will – they won’t have to pay Stamp Duty on the market value of the property.
However, if you exchange properties with another person, you will each have to pay Stamp Duty on the property you receive based on its market value.
Stamp Duty on second homes
If you’re buying an additional property, such as a second home or certain buy-to-let properties, you’ll still have to pay an extra 3% in Stamp Duty on top of the revised rates for each band up until 31 March 2021.
This increased rate applies to properties bought for £40,000 or more.
It doesn’t apply to caravans, mobile homes, or houseboats.
How is Stamp Duty paid?
When you purchase a house, your solicitor will handle the payment of the stamp duty for you, but you can do it yourself.
You will need to pay within 14 days to file a Stamp Duty Land Tax (SDLT) return and pay any dues. If you don’t submit a return and pay the tax within those two weeks, HMRC might charge you penalties and interest.
If you would like additional advice about stamp duty, or selling and buying property, get in touch with Argyle Estate Agents and speak to one of our expert team.