There was good news for first-time buyers in Chancellor Philip Hammond’s Budget today: Stamp Duty Land Tax (Stamp Duty) will be scrapped immediately for first-time buyers of homes below £300,000.
First-time buyers will pay nothing on the first £300,000, and then five per cent on the remainder up to £500,000. If the purchase price is over £500,000, however, no relief will apply and Stamp Duty will be payable at standard rates. It is worth noting that this only applies to first-time buyers purchasing residential properties, not commercial properties or companies.
As always, the devil is in the detail, and the relief is more complicated that it may first appear. For example, the purchase must be for your own residence – a buy-to-let purchase will attract standard rates even if you are a first-time buyer. If you are buying jointly and are both classified as first-time buyers, but only one of you will live in the property, again you would not be able to claim the relief, and would have to pay Stamp Duty on the standard rates.
To be a first-time buyer, you must not have previously held a major interest in a dwelling anywhere in the world, either alone or with others. This would mean someone who inherited a property or has been gifted a property would not be classified as a first-time buyer.
As an example, if your parents purchased a house for you to live in as a student, and it was in their name, you may still be able to be classified as a first-time buyer. However, if it was purchased in the student’s name, even if all the funds were provided by the parents, the student would no longer be able to claim first-time buyer relief, which may catch out some people.
You may also not be classified as a first-time buyer if you have had an interest in land as a trustee, although this will depend on the trust terms and whether you were a beneficiary of the trust.
If you are purchasing jointly, all purchasers must qualify as first-time buyers to claim the relief. If a couple intend to purchase and one has owned a property before, no relief can be claimed, and Stamp Duty will be calculated at standard rates.
Claiming the relief when purchasing a shared ownership property will also need some thought, as the relief will only apply when the ‘market value’ treatment applies. This is a complicated area your solicitor will discuss with you to ensure the best course of action is taken.
There will inevitably be debate over the coming days regarding whether this may in fact push up prices, and therefore benefit sellers rather than first-time buyers relatively quickly.
During his speech Mr Hammond also announced various consultations around planning to help boost house building, including a threat to intervene with compulsory purchase orders if landowners and developers were found to be holding back on building “for commercial rather than technical reasons”.
He also took the opportunity to underline the Government’s pledge to invest a further £10 billion in the Help to Buy equity loan scheme in October and announce a £200 million large-scale regional pilot for the Right to Buy for housing association tenants in the Midlands.
The Chancellor also addressed the issue of empty properties saying: “It can’t be right to leave property empty when so many are desperate for a place to live. So we will give local authorities the power to charge a 100 per cent council tax premium on empty properties.”