Since March 2023, first-time buyers have been exempt from stamp duty land tax on all property purchases below £250,000.
However, the stamp duty holiday is set to come to an end on March 25th and there has been no indication from the coalition that it will be extend it beyond this deadline.
The question is, where will the abolition of the stamp duty exemption leave those struggling to get a foot on the property ladder?
There are two answers to this question. The first requires an explanation of stamp duty land tax rates and how they apply to different price brackets, while the second relates to the steps you can take if the holiday is abolished.
Purchase price: £0 – £125,000
Whether you are a first-time buyer or have previously owned property, you do not pay stamp duty on properties worth less than £125,000.
Purchase price: £125,001 – £250,000
Under the current setup, first-time buyers do not pay any stamp duty on properties valued below £250,000.
Unless the stamp duty holiday is extended, those buying their first home will have to pay one per cent of the purchase price in stamp duty land tax. This is the same rate of SDLTthat second and third-time buyers have to pay.
Purchase price: £250,001 – £500,000
As the exemption only related to homes under £250,000, reinstating it will have no bearing on the amount of SDLT first-time buyers will pay if the property falls into this bracket.
All buyers purchasing a home in this price range will pay a three per cent rate of SDLT.
Purchase price: £500,001 – £1 million
Homes in this price bracket incur a four per cent rate of stamp duty land tax.
Purchase price: £1 million or above
Any property costing over £1 million will incur an SDLT rate of five per cent.
There are other exemptions in place for both first-time buyers and those who have owned property before.
Anyone purchasing a zero-carbon home under £500,000 can avoid paying stamp duty. If the purchase price is above £500,000, you can get a 15 per cent reduction.
Exemptions also exist for those buying homes in disadvantaged areas. The threshold for stamp duty land tax for such properties is £150,000, which will become relevant for first-time buyers if the stamp duty holiday is not reinstated.
If, as many property industry experts believe, the holiday is not reintroduced, you need to look at what your options are.
What many home buyers have done in recent years is employ the services of a stamp duty mitigation company.
These firms are experts in stamp duty planning and it is their job to see if you can avoid paying stamp duty land tax or reduce your bill by a significant amount.
Many such organisations have emerged in recent years, so you have plenty in the way of choice.
However, there are some points you need to check with each organisation you speak to.
To begin with, the company should be able to demonstrate a track record of success and the savings they can make should be large enough to make the process worthwhile.
HM Revenue and Customs takes a dim view of those it believes are trying to avoid paying their fair share, so you must enquire about how HMRC views certain schemes before committing to any one in particular.
Stamp duty planning could save you several thousands of pounds, giving you more money to spend on making your new house the dream home you want it to be.
Leave a Reply