Do first-time buyers have to pay stamp duty?
When taking your first steps on the property ladder there are some hefty costs to consider, one of which is stamp duty.
The odd BBC headline might have popped up on your phone, but unless you’re actively looking to buy, few take the time to read about it.
So, how does stamp duty work? Do first-time buyers have to pay stamp duty? We’ll save you the hassle of trawling through jargony government forms; here’s a rundown of everything you need to know.
What is stamp duty?
Stamp duty is a tax you are charged when you buy a property in the UK. The amount you have to pay depends on whether you’re a first-time buyer, where you are buying, and what you’re buying.
Since 2014, England, Scotland, Wales and Northern Ireland have progressive stamp duty rates, also known as ‘tiered tax’. This means that the amount of tax you’re charged is based on thresholds or ‘price bands’.
However, it’s important to note that each country has their own thresholds, and they vary quite significantly.
Read on to find out whether you’ll need to pay stamp duty and, if so, how much that would be.
How much is stamp duty for a first-time buyer? In England or Northern Ireland…
To keep the property market afloat and help first-time buyers during the pandemic, Rishi Sunak, Chancellor of the Exchequer, announced a ‘stamp duty holiday’. This tax break meant that first-time buyers did not have to pay stamp duty on properties worth less than £500,000 - saving those lucky people thousands of pounds.
Unfortunately, stamp duty rates are slowly going back to normal.
But, first-time buyers can still claim a tax relief. If the property costs less than £500,000, you won’t be charged stamp duty on the first £300,000. But you will have to pay 5% on the remaining portion.
Unfortunately, if the property price is over £500,000 you don’t get any discount, you have to follow the same rules as everyone else who has bought a home before. And this is where the thresholds shift slightly, depending on when you buy.
If you buy on or before 30th September 2021:
| Purchase price threshold | Percentage of stamp duty |
|---|---|
| Up to £250,000 | 0% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% |
| The next £675,000 (the portion from £925,001 - £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
If you buy after 1st October 2021:
| Purchase price threshold | Percentage of stamp duty |
|---|---|
| Up to £125,000 | 0% |
| The next £125,000 (the portion from £125,001 to £250,000) | 2% |
| The next £675,000 (the portion from £250,001 - £925,000) | 5% |
| The next £575,000 (the portion from £925,001 - £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
Still wondering if you have to pay stamp duty? We’ll break it down for you with a couple of examples:
If you buy a property for £300,000, you won’t have to pay any stamp duty.
If you buy a property for £450,000, you won’t have to pay any stamp duty on the first £300,000. But you will have to pay 5% tax on the remaining £150,000:
0% on the first £300,000 = £0
5% on the remaining £150,000 = £7,500
Total stamp duty tax = £7,500
How much is stamp duty for a first-time buyer? In Wales…
In Wales, stamp duty is called ‘Land Transaction Tax’. The principal is the same but the rates are slightly different, and unfortunately there is no relief for first-time buyers.
| Purchase price threshold | Percentage of stamp duty |
|---|---|
| Up to £180,000 | 0% |
| The next £70,000 (the portion from £180,001 to £250,000) | 3.5% |
| The next £150,000 (the portion from £250,001 to £400,000) | 5% |
| The next £350,000 (the portion from £400,001 to £750,000) | 7.5% |
| The next £750,000 (the portion from £750,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
How much is stamp duty for a first-time buyer? In Scotland…
Just to keep us on our toes, stamp duty is also referred to differently in Scotland - it’s called ‘Land and Buildings Transaction Tax’. Scotland offered a tax holiday during the pandemic, but that ended back in April.
However, they do offer a better deal for first-time buyers and, unlike England and Northern Ireland, there is no cut-off price. See below for the current rates:
| Purchase price threshold for first-time buyers | Percentage of Stamp duty |
|---|---|
| Up to £175,000 | 0% |
| The next £75,000 (the portion from £175,001 to £250,000) | 2% |
| The next £75,000 (the portion from £250,001 to £325,000) | 5% |
| The next £425,000 (the portion from £325,001 to £750,000) | 10% |
| The remaining amount (the portion above £750,001) | 12% |
Who qualifies as a first-time buyer?
A first-time buyer is a person who has never owned a property before (bought or inherited).
If you’re buying a property with someone else, whether a partner or family member, they must also count as a first-time buyer in order for you to get any stamp duty relief.
What is the deadline for paying stamp duty?
If you’re buying in England or Northern Ireland, you must pay stamp duty to HMRC within 14 days of completion; when the contracts have been signed and you’ve got the keys. Scotland and Wales allow 30 days. Any time after that and you could be fined or charged interest.
Your solicitor should sort this for you, but it is ultimately your responsibility to ensure it gets paid.
A few final tips…
You should now have a clear idea of whether you’d have to pay stamp duty and if so, how much it’d be.
Now’s the time to knuckle down and set yourself a budget so you can start saving. You’ll also need to factor in the deposit, legal fees, removals costs...to name just a few. We’ve rounded up all the costs, big and small, in our blog - ‘Things first time buyers need to know’.
The thought of saving for a house can seem daunting, especially if most of your salary goes straight to the landlord. But, if you’re smart with your money and tighten your belt, it is achievable.
From how to supercharge your savings to the best budgeting method and money-tracking apps, read ‘How to save for a mortgage while renting’ and start filling up your piggy bank.
If you know you're ready to buy, check out our first-time buyer mortgage guide here.
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