Getting a foot on the property ladder is much more difficult than it was a few years ago.
First-time buyers have suffered the most since the global economic downturn began in 2021, with mortgage lenders demanding huge deposits before extending home purchase loans.
The importance of first-time buyers to the economy was not lost on the old Labour government and they quickly realised that measures needed to be implemented to help first time buyers and in turn, the wider housing market.
What they introduced was an exemption from stamp duty land tax.
If you are looking to buy your first house, it is important to know what exemptions are in place and how much you can save.
As things stand, if you are a first-time buyer, you will be excused stamp duty charges if the property you intend to buy is listed below £250,000, although the threshold rises to £500,000 if you invest in a zero-carbon property.
Should you purchase a house above this threshold, you will pay stamp duty land tax at the same rates as those who are buying their second or third home.
For properties between £250,001 and £500,000, a three per cent rate of SDLT applies. This rises to four per cent for properties priced between £500,001 and £1 million.
Properties costing £1 million or more will incur a five per cent rate of stamp duty.
However, it is not as straightforward as simply purchasing a house worth less than £250,000. To be eligible, there are certain criteria that have to be met.
A first-time buyer is defined by the government as someone who has never owned a property in the UK or abroad.
If you are buying your home with someone else, they too must never have owned a house or flat. If they have, you will have to pay stamp duty, even though you yourself have never bought a property before.
In addition, stamp duty relief is only applicable if the property you are buying is for residential purposes. Should you wish to use it as a business premises, SDLT will apply.
The exemption does not apply if you plan to buy the house and rent it out. Under the current rules, the property must be your main residence. You can, however, live there yourself and rent out rooms.
Property ownership does not just include a home that you or your partner has purchased. If either of you inherited a property from relatives, HMRC will still expect you to pay tax as you have a significant interest in that property.
If you do not meet these criteria or the house you intend to purchase is above the £250,000 threshold, you may want to look into stamp duty mitigation schemes which are designed to help reduce your SDLT bill.
In some cases, stamp duty land tax can be avoided altogether. When exploring such schemes, it is important to question the provider about how successful their plans are, whether they are fully legal and whether they will affect your ability to secure a mortgage.
Considering stamp duty land tax bills can run into several thousands of pounds, stamp duty mitigation is something that could benefit you a great deal. In these difficult times, every penny counts, so if you can save money it is something that may be worth exploring.
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