Chancellor Philip Hammond yesterday delivered a hotly anticipated budget where he revealed relief for first time buyers by limiting the amount of Stamp Duty they will pay on their first purchase.
Hammond hopes that a change to the Stamp Duty Land Tax (SDLT) will encourage people to buy their first property, giving a boost to the property market and helping the dream of owning your own home become a reality. Some analysts say this will push the price of properties higher.
SDLT is the tax paid on the purchase price when you purchase a property, if you do not own another property then you will pay tax on the value of the property above £125,000. The Chancellor’s change seeks to give further relief meaning that if you are a First Time Buyer you will not pay SDLT on the first £300,000 of your first property meaning this could save you up to £5,000 in tax.
If your purchase is more than £300,000 but less than £500,000 then you will pay 5% on the value between £300,000 and £500,000. Under these rules it could see 80% of First Time Buyers pay no SDLT at all and there are hopes this will help over a million First Time Buyers get on the property ladder.
If, however, your purchase is worth more than £500,000 then you will not benefit from the relief and will pay SDLT on the value above £125,000. The Chancellor added that this will only apply to 5% of transactions, mainly in the London area.
To be eligible for this relief you must be a First Time Buyer which, in Treasury guidance, means you have not previously owned a freehold or leasehold interest in a property and you are purchasing your first property. If you are purchasing with other people then all purchasers must be First Time Buyers in order to be eligible.
The Treasury have advised that this relief is available for all those completing on a purchase from the 22nd November 2017. Unfortunately those who completed before this date are not eligible.
Former Chancellor George Osborne introduced the Higher Rate of SDLT for those buying an additional property in the hope this would deter some investors leaving more housing stock for first time buyers.
It remains to be seen how this relief will affect the housing market. If you are unsure about your position following this announcement or think you are eligible then speak to one of our experienced conveyancers.