Opinion and insights from Roythornes
Christmas comes early for first-time buyers
In last week’s Autumn Budget, Chancellor Phillip Hammond pulled out an early Christmas present from Santa’s sack, by removing and reducing Stamp Duty Land Tax (SDLT) for first-time buyers with immediate effect.
First-time buyers now purchasing property up to £500,000 will find that no SDLT is payable on the first £300,000 and then only 5% will apply from £300,000 - £500,000.
The Treasury estimates that this change will help over one million first-time buyers get onto the housing ladder over the next five years and, in turn, provide much needed support for the housing market.
What do these changes mean in practice?
Prior to the Budget announcement, first-time buyers in England, Wales and Northern Ireland paid Stamp Duty on purchases above £125,000. Effective from one minute past midnight on 22 November, Stamp Duty will be abolished for first-time purchases up to £300,000, and pay 5% on purchases between £300,000 and £500,000, effectively halving the current rate that is to be paid.
The table below sets out these changes:
22 November 2017 Onwards
Stamp duty due is unchanged
Unfortunately, these changes will not benefit those who completed their purchases before the 22 November, and it would be a highly unusual move if the relief was made retrospective. It is very likely, however, that those who completed their purchase on the day of the Budget could see up to £5,000 owing to them.
First-time buyers in Wales will benefit from these changes up until April next year, when the matter is devolved to the Welsh Government, which is introducing a tax on land transactions. It will then be for the Welsh Government to decide if any future reliefs apply to Land Transaction Tax.
The definition of first-time buyers has also been brought in line with the definition for previous reliefs. A first-time buyer is someone who has never owned a freehold or leasehold interest in a dwelling before and who is purchasing their only main residence. Residential property anywhere in the world is counted when determining whether someone is a first-time buyer.
All purchasers in a joint purchase must be first-time buyers in order to be eligible for relief. For example, a couple where only one party is a first-time buyer will not qualify for the relief.
With current transactions, it will therefore be necessary to establish by means of a simple questionnaire whether clients qualify for relief and, if so, recalculate the Stamp Duty where payable.