New Stamp Duty rules explained
In an early Christmas present for First Time Buyers, the Chancellor recently unveiled new rules around Stamp Duty (or Stamp Duty and Land Tax, to give it its proper name). This means that First Time Buyers are able to claim an exemption to the Stamp Duty they will pay on their first home, meaning that either they will pay no tax at all on their purchase, or a greatly reduced amount.
The hope by the Government is that the money that First Time Buyers will save by not having to pay Stamp Duty can be used towards their deposit and other costs associated with their purchase, and as a result enable more people to get on the property ladder.
But, as the rules around Stamp Duty can be quite complex, there are obviously quite a few questions you may be asking. So, I’ve put together a basic guide to help you understand if you qualify, how much you can save and what you need to do to make sure that you benefit.
How much will I be able to save?
There’s a useful tool online, provided by HMRC, that will help you to work out how much you’ll pay under the new rules, which you can find here: https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro
What does ‘First Time Buyer’ mean?
You must be a First Time Buyer to benefit from the exemption, which means you can’t have owned a property previously, either on your own or with someone else.
If you’re buying as a couple, you must both be First Time Buyers to qualify for the exemption. If either of you have owned a property before, either on your own or with someone else, you won’t qualify.
There are no age restrictions on the scheme.
What if I’m buying my first property but it’s an investment, rather than a home for me to live in?
The property must be your main residence; you won’t be able to claim the exemption on Stamp Duty if you’re buying a property to let out. If you’re going to be a landlord, then you’ll pay Stamp Duty at the normal rate.
Are there any geographical restrictions to the Stamp Duty exemptions?
The new measures won’t be introduced in Scotland, as Stamp Duty and Land Tax was devolved to Scotland in 2015. The exemption scheme will operate in Wales until April 1, 2018 when Stamp Duty will be devolved to Wales.
The scheme will operate in England and Northern Ireland, and at the moment no end date to the scheme has been published.
So how much on Stamp Duty will I save if I qualify for the scheme?
If the property you’re buying is worth under £300,000, providing you qualify as a First Time Buyer you won’t pay any Stamp Duty at all, which will save you up to £5,000.
If the property you’re buying is worth over £300,000 but under £500,000 then you’ll pay Stamp Duty on the balance over £300,000. So, for example, if the property is worth £400,000 you’ll now pay £5,000 rather than £10,000 in Stamp Duty that you would have paid previously.
If the property you’re buying is worth over £500,000 you’ll pay the full rate of Stamp Duty at the normal rate and won’t qualify for any exemption, even if you’re a First Time Buyer.
How do I claim the Stamp Duty saving?
To benefit from the exemption, your solicitor or conveyancer will send you a declaration form as part of your paperwork which you’ll need to sign to confirm that you’ve never owned a property before and are a First Time Buyer.
When do the new rules take effect?
The exemption for First Time Buyers was effective as of midnight on 22nd November, meaning that anyone qualifying for the scheme can claim if their purchase completes after this date. It doesn’t matter if you exchanged prior to the 22nd November, you will still be able to benefit from the new rules provided your purchase completes after this date.
Your solicitor or conveyancer will be able to assist you and provide more details on your personal situation and if you may be able to benefit from the exemption, so do make sure you ask them about the new rules and what may apply to you.
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