First-time buyers (FTBs) in the UK are currently enjoying an exemption from stamp duty – but what exactly does this mean?
In the March 2023 Budget, then chancellor of the Exchequer Alistair Darling made the announcement that he would be suspending the stamp duty land tax (SDLT) charge for anyone taking their initial step on the property ladder by purchasing a home for less than £250,000.
It was hoped that such a move would re-stimulate the housing market and prompt FTBs to return, at a time when securing mortgage finance was proving difficult amid the banks’ strict lending criteria, while the required deposits were significant.
The SDLT holiday for FTBs will be in place until March 25th 2024 – and if you are thinking of buying your first home you may wish to take advantage of it because it could see you saving a sizable chunk of money.
So how does it work? In the UK, a tax – SDLT – is charged on the sale of every property or plot of land, be it residential or commercial, although the thresholds are different for each of these.
In terms of residential property, there is no levy if the house or flat you are buying costs less than £125,000, but if you buy it for between £125,001 and £250,000 you will be charged one per cent of the final sale price in duty.
So, if you are purchasing a house for £175,000, the SDLT you will need to pay is £1,750. This is a heavy expense at a time when you will also be forking out for solicitors’ services, search fees, surveys and furniture removal – in addition to the amount you are paying for the house itself, which is why this holiday is so advantageous.
There are only a few criteria to which you need to abide if you want to take advantage of the current exemption. The first is quite self-explanatory – you must be able to prove you are an FTB.
In addition to this being your first property, it must also be the first home of anyone you are buying jointly with. If they or you have ever owned a dwelling before, you will be charged SDLT on the sale and in many cases your solicitor will need to check that you are both FTBs.
This rule is not just inclusive to the UK and even if the house or apartment you once bought was somewhere overseas, you will not qualify for the exemption.
The next rule is that the property you are buying will be your only home or your primary residence, meaning that investing in holiday accommodation is not an option.
Next, the completion date of your sale must fall before March 25th 2024 – unless, of course, the stamp duty holiday is extended by the government prior to this cut-off.
Finally, the home you are buying needs to cost £250,000 or less. Anything over this threshold will be subject to SDLT – and not at the one per cent rate. Indeed, properties sold for between £250,001 and £500,000 are charged at three per cent, rising to four per cent for dwellings sold for £500,001 to £1 million, and over and above this the charge is five per cent.
As you can see, a little stamp duty planning is always worthwhile and by taking advantage of the FTB SDLT holiday now, you could save yourself a sizable sum.
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