Following on from the Stamp Duty Land Tax (SDLT) overview:
Schedule 6ZA of the Finance Act 2018 provides that from 22 November 2017 first time buyers can claim relief from SDLT when purchasing properties that do not exceed £500,000. No SDLT is payable on the first £300,000 of the purchase price (therefore properties costing up to £300,000 attract full relief and £0 stamp duty is paid) and a blanket rate of 5% is then payable on the remaining consideration not exceeding £500,000.
Properties in excess of £500,000 are liable to the normal rates of SDLT and first time buyer relief is not available.
Definition of a first time buyer
A purchaser must not (alone or with others) have previously acquired a major interest in a dwelling or an equivalent interest in land anywhere in the world; this includes previous acquisitions by inheritance or gift. If a property is bought jointly, all the purchasers must meet the conditions below.
Conditions for claiming relief
- To be eligible for first time buyer relief:
- the buyer(s) must be a first-time buyer and intend to occupy the purchased property as their only or main residence;
- the cost of the property must not exceed £500,000;
- the effective date of the transaction is on or after 22 November 2017;
- the transaction must be a ‘major interest’ in the property – a freehold or leasehold (not less than 21 years) estate; and
- the purchase must not be linked to another land transaction, except for –
- land that forms part of the grounds or garden of the purchased property or
- land that subsists for the benefit of the purchased dwelling or its garden and grounds.
Since 29 October 2018, this relief is available for first-time buyers acquiring a property under shared ownership arrangements and alternative finance arrangements.
The relief is not available to the purchase of non-residential, mixed-use properties or acquisitions of more than one dwelling in a single transaction (as these are subject to the higher rates of SDLT under schedule 4ZA of the Finance Act 2003).
The relief does not affect the amount of SDLT which may be payable on the net present value of any rent payable under a lease.
Illustration of first-time buyer relief
A first time buyer purchasing a dwelling for £490,000, would pay £9,500 in SDLT, calculated as follows:
Proportion of consideration Rate Amount
First £300,000 of the purchase price 0% £0
Remaining £190,000 5% £9,500
Click on the HMRC link to calculate the SDLT due on your purchase – www.tax.service.gov.uk/calculate-stamp-duty-land-tax
Claiming first time buyer relief
A land transaction return or an amendment to that return must be used to claim relief and the code ’32’ must be entered into the relief box. Where the return is completed and submitted online, the tax will be calculated automatically using the special rates for first time buyers.
Purchasers should use the HMRC Stamp Taxes calculator link (above) to work out their SDLT liability.
Question and answers
1. What is the effective date for transaction?
Normally this is the date of completion, although it may be earlier if the purchaser takes possession or pays most of the consideration in advance of completion.
2. I am a first time buyer but my spouse owned a dwelling before we were married. Do we qualify for first time buyer’s relief?
No. For joint purchases, all purchasers must be first time buyers.
Even if you purchased the property in your sole name, spouses are considered as one unit and you would still be considered to have owned a property before.
3. Can I claim relief if I have inherited a dwelling (which I am now selling) and am using the sale proceeds to purchase a home?
No, if the inheritance was a freehold or leasehold interest in a dwelling.
4. We are first time buyers buying a dwelling jointly but only one of us intends to use the property as our main or only residence. Can we claim the relief?
No. All purchasers must intend to use the property as their main or only residence.
5. Can I claim relief if I have previously bought a dwelling as a trustee?
Yes, provided that you were not also a beneficiary of the trust and you meet all the other first time buyer conditions.
6. I am buying a commercial property and have never owned an interest in any residential or commercial property before. Can I claim first time buyer’s relief?
No. This relief only apply to the purchase of a residential dwelling.
7. Is there any age limit on claiming the relief?
No. First time buyers can be any age.
8. I claimed first time buyers’ relief when I acquired my first house in December 2017. I paid £475,000. The seller has now offered to sell me the land at the end of my garden for £30,000. If I buy that, what is my SDLT position?
If you buy the garden, that transaction will be ‘linked’ to the purchase of your house. As total relevant consideration for your house and the additional garden exceeds £500,000, you will lose your first time buyers’ relief on your house. You would need to repay the SDLT relief and file a further return in relation to your home. You will also have to pay SDLT on the £30,000 paid for the garden, applying the usual SDLT rules for ‘linked’ transfers.
9. I currently live in rented accommodation but own a dwelling that is rented out. I am now looking to purchase my first home, for me and my family to live in. Can I claim first time buyers’ relief?
No. The relief can only apply to individuals who have not previously owned a dwelling either in the UK or anywhere in the world.
10. I previously bought a house jointly with my spouse/partner. The relationship has broken down so can I be treated as a first time buyer?
No. Where a person has previously acquired an interest in a dwelling as a joint tenant or a tenant in common, that person is not a first time buyer.
For more information on first-time buyer’s relief or to get specialist conveyancing legal advice chat to our residential or commercial property team on 01483 451 900, email us on sols@gordonsols.co.uk or make an online enquiry here.