Do You Pay Stamp Duty As A First-Time Buyer?

The process of purchasing a house for the first time comes with several legal agreements and fees that you must pay close attention to.

One such fee is the stamp duty land tax, often abbreviated to SDLT, which is a significant addition to the price of your new home. After purchasing your new home, you must be aware of the amount that must be paid, as it varies depending on the property value.

But as a first-time buyer, you may have to pay reduced or no SDLT with the exception introduced by the UK government. Curious as to what its terms are?

Continue reading this comprehensive guide to learn all about Stamp Duty Land Tax and how much you need to pay as a first-time buyer.

About Stamp Duty Land Tax

Stamp Duty Land Tax is a tax applied when land and property are purchased in English and North Irish territories. Its equivalents exist in Wales and Scotland by the names “Land Transaction Tax” and “Land and Buildings Transaction Tax”, respectively.

This tax is usually a percentage of the property value and may increase based on whether the value goes above a certain threshold or not. Only after the owner pays the tax can they gain complete ownership of the land.

Moreover, the buyer type and time also play a role in whether the SDLT amount owed increases or decreases. For example, a first-time buyer can take advantage of a significantly lower amount of SDLT than a previous homeowner or a landlord purchasing a Buy to Let property.

Note that SDLT is only paid by the land buyer instead of the former owner. 

SDLT Rates For First-Time Buyers In The UK

First-time buyers are eligible for SDLT relief by the UK government, which reduces the amount of payable land tax.

For properties valued up to £425,000, the property buyer does not need to pay SDLT, provided that they are a resident of the UK. If your property is valued below £625,000, you will be able to claim SDLT relief and pay 5% of the difference.

To put it simply, for a property valued at £625,000, you must pay 5% of £200,000 (625,000-425,000), which amounts to £10,000. Should the property value exceed £625,000, you will not be able to claim SDLT relief.

In such cases, the SDLT rates are as detailed in the table below.

Property Value	SDLT Rate
£425,000 or less	0%
The next £675,000 (the portion from £250,001 to £925,000)	5%
The next £675,000 (the portion from £925,001 to £1.5 million)	10%
The remaining amount	12%

First-Time Buyer Stamp Duty In Scotland

The stamp duty tax of Scotland, known as the Land and Buildings Transaction Tax (LBTT), is calculated a little differently from SDLT.

For first-time buyers, LBTT only applies to properties valued above £175,001 and starts at 2% of the net value. The amount of LBTT payable increases in fixed increments, as detailed below:

Property Value	LBTT Rate
Up to £145,000	0%
£145,001 to £250,000	2%
£250,001 to £325,000	5%
£325,001 to £750,000	10%
£750,001+	12%

First-Time Buyer Stamp Duty (Land Transaction Tax) In Wales

First-time buyers receive no Land Transaction Tax relief in Wales and must pay the standard rates applicable based on the property value. That said, Wales does not require homeowners to pay LTT for properties valued up to £180,000, first-time buyer or not.

The rates for LTT in Wales are as follows:

Property Value	LTT Rate
Up to £225,000	0%
£225,001 to £400,000	6%
£400,001 to £750,000	7.5%
£750,001 to £1.5 million	10%
£1.5 million +	12%

Avoiding Stamp Duty

Stamp duty is classified as a mandatory tax by the UK government, and as such, every homeowner must pay it when purchasing a new home. 

That said, certain special circumstances allow you to be able to receive refunds or discounts. For instance, stamp duty land tax does not apply to any property worth £40,000 or below.

Another condition where you can receive refunds is by claiming an overpayment. Should your property be deemed uninhabitable for some reason, you may consider applying for a rebate.

This is a complex circumstance that will require plenty of legal manoeuvring, which is when you must contact a professional.

FAQs

1. How do I pay Stamp Duty Land Tax?

It’s usually best to let a solicitor handle this, but you can also opt to pay online.

2. When should I pay SDLT?

As the homeowner, you must pay SDLT within 14 days of the date of completion in England and Ireland. In Scotland and Wales, you have a month to pay the respective land taxes from the date of purchase.

3. Can stamp duty be added to the mortgage?

Adding stamp duty to your mortgage is possible, but this will have an effect on the amount of interest you will be paying. As such, it’s usually preferable to pay stamp duty separately from your mortgage.

Final Words

Since it is a mandatory tax, stamp duty must be paid by all first-time home buyers, provided that the property value exceeds the given threshold.

First-time buyers in England, Northern Ireland and Scotland receive significant discounts on the amount of stamp duty tax payable. And while Wales does not share this, its government requires no LTT to be paid for properties valued up to £225,000.

Based on the value of the property, you can gauge how much tax you will be paying. And if the property value falls below £625,000, you will be able to utilise the First Time Buyer stamp duty relief.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.