A commonly used relief for Stamp Duty Land Tax is First-Time Buyers’ Relief. This article introduces Stam Duty Land Tax, explains the benefits of being a first-time buyer for Stamp Duty Land Tax purposes, and discusses some of the key rules for First-Time Buyer’s Relief. What is Stamp Duty Land Tax? 

Stamp Duty Land Tax, or SDLT, is a tax in England paid on many property transactions, usually assessed on the value of that transaction. The specific tax called Stamp Duty Land Tax was introduced in 2003, but has its roots in Stamp Duty, a tax that began being collected in 1694 to fund William III and Mary II’s ‘War of the Grand Alliance’ against France. It was this same tax that led to the American War of Independence, with its outcry of “no taxation without representation!” In the 19th century it was expanded to apply on the transfer of land and assessed according to the value of the transaction, which is the same principle that applies to today’s SDLT. 

These days, SDLT is mainly encountered as a tax one pays when purchasing a property, assessed on the purchase price. But it is also applicable in other land transactions, such as a transfer of equity, the taking of a lease, or paying to have a restriction removed from one’s land. 

How to Qualify for FTBR

There are a few requirements for FTBR to apply: 

First-Time Buyer 

The key requirement may seem obvious; you must be a first-time buyer. But this is not as straightforward as it may first appear. 

To be a first-time buyer means more than simply not having owned a home before. For example: 

1. If you have been gifted a dwelling, such as by inheritance, you may no longer be a first-time buyer.
2. If you own a dwelling in trust for someone else, such as for a child who has inherited a property but cannot yet legally own it, you may no longer be a first-time buyer.
3. If you own a property that you let out or keep as an investment, but have never lived in it yourself, you may no longer be a first-time buyer. 

In all of these scenarios, FTBR remains unavailable even if the property in question has since been sold or otherwise disposed of. 

Purchasers

It is also crucial that all purchasers are first-time buyers. If you are purchasing with your partner, but they have owned a property in the past or own one now, even though you might qualify for FTBR alone it won’t be available to you with your partner.

Home

Another requirement is that you (and any co-purchasers) are buying the property to live in as your only or main home. If you are buying a holiday home or buy-to-let, for example, FTBR won’t be available. 

Purchase Price

Finally, as we have discussed, the purchase price must be no more than £500,000. If it is over £500,000, FTBR is unavailable. 

Does FTBR Carry Over?

What if you buy a property for, say, £500,001; or you are buying your first home but with a partner who once inherited a house that is now let out. Can you bank your FTBR for a later date? 

Unfortunately, no. Even if you weren’t able to claim FTBR on your first purchase, once you’ve become a property owner your right to use FTBR is gone for good. 

Is FTBR available on new-builds?

Yes, provided all the normal eligibility rules are met. How much is SDLT? 

The rate at which SDLT applies differs between residential and non-residential property. There are also higher rates in certain scenarios. In this article we will be using residential standard rates. We will assume that the transaction in question is a purchase. 

SDLT is applied as a percentage rate on portions of the purchase price. At time of writing, this works as follows: 

So a purchase price of £400,000 on these rates would attract an SDLT liability of £10,000, calculated as follows:

There are many reliefs available to reduce SDLT liability. The one we are going to focus on is First-Time Buyers’ Relief (FTBR). 

First-Time Buyers Relief

If a purchaser is eligible for FTBR, the SDLT rates are as follows: 

So a purchase price of £400,000 would, for a first-time buyer, attract an SDLT liability of £5,000, instead of the £10,000 liability for a standard home-mover. 

The savings as much starker when purchasing a property of £300,000 or less, where no SDLT would be due at all for a first-time buyer. 

However, FTBR is completely unavailable for a purchase price of over £500,000. In that case, the standard rates will likely apply. 

If you would like on whether you qualify for FTBR or for any property transaction queries please contact one of our specialist conveyancers who will be able to advise you further.