Do You Pay Stamp Duty As A First-Time Buyer?

Adrian Collins

October 29, 2021

Mortgage Advice

Buying a home for the first time is an exciting time. From picking out new furniture to choosing your paint colours, you’re likely caught up in that ‘new house’ bubble as soon as your mortgage and property purchase is approved. But before you head down to your nearest DIY store, please ensure you have put aside funds towards stamp duty.

Do you pay stamp duty as a first-time buyer? There are particular circumstances for your stamp duty as first-time buyers in England and Northern Ireland, and we’ve covered everything you need to know below.

Read on now for our complete guide to what stamp duty is when you have to pay it and what you’ll need to do to ensure your legal responsibilities are met:

 Stamp duty guide for first-time buyers
Stamp duty guide for first-time buyers

What Is Stamp Duty?

Stamp duty is a specific tax you need to pay when purchasing property or land in either England or Northern Ireland. While the specifics of stamp duty have changed over time, the essentials remain the same, from stamp duty holidays to changes in tiers.

When you purchase your home, and it is worth over a certain amount, you’ll be required to pay a standardised amount of money to HMRC as tax. The rules and requirements of stamp duty are slightly different for a first–time buyer, but we’ll cover that in further detail below.

Whether you’re purchasing your first property or your fifth, you’ll need to pay stamp duty on your property, whether it’s freehold or leasehold.

In Scotland and Wales, different taxes apply for the same process. In Scotland, this is called the Land and Buildings Transaction Tax (LBTT), while in Wales, this is known as the Wales Land Transaction Tax (LTT).

Stamp Duty Guide For First-time Buyers

What Is A First-time Buyer?

A first-time buyer is classified as anyone who has not purchased a property before and is buying one for the first time.

This means you can’t have owned property in the UK or overseas, you can’t have inherited property, and the property you are purchasing will be your sole residence. You cannot be classified as a first-time buyer to pay no tax on a buy-to-let mortgage.

What Are First-time Buyer Rules For Multiple Applicants?

If you are applying jointly for your mortgage with a partner, spouse or anyone else, they also must meet all of the criteria to be a first-time buyer. If anyone involved directly in the purchase and joint mortgage has owned property before, you both will be ineligible for first-time buyer stamp duty rates.

Will I Have To Pay Stamp Duty As A First-time Buyer?

That depends on exactly how much the property you’re buying is worth.

Different rules apply to first-time buyers. As of the 1st of July 2021, you will not need to pay any stamp duty for properties worth under £300,000.

If your property is slightly above this mark, but below £500,000, you’ll only pay your stamp duty on the additional amount.

So, if you buy a home for £350,000, you’ll only need to pay your stamp duty on £50,000 of the purchase.

Properties worth more than £500,000 are not eligible for first-time buyer stamp duty relief. If your property is worth more than £500k, that means you’ll need to pay stamp duty just like anybody else.

How Much Does Stamp Duty Cost?

You may be wondering exactly how much stamp duty is likely to set you back when you buy a home. Luckily, HMRC follows a standardised tiered system, making it easy to see how much you’ll be expected to pay.

Stamp duty pre-October 1st, 2021

£0-£250,000 property value: 0%

£250,001-£925,000 property value: 5%

£925,001-£1.5 million property value: 10%

Over £1.5 million property value: 12%

Stamp duty post-October 1st, 2021

£0-£125,000 property value: 0%

£125,001-£250,000 property value: 2%

£250,001-£925,00 property value: 5%

£925,001-£1.5 million property value: 10%

Over £1.5 million property value: 12%

All percentages for stamp duty listed are the percentage of the value of the property. For example, 5% stamp duty on a £300,000 home would be £15,000.

 How much does stamp duty cost?
How much does stamp duty cost?

Are First Time Buyers Exempt From Stamp Duty?

First-time buyers aren’t technically exempt from stamp duty, but they do get a far higher threshold than standard before you need to pay anything.

As long as your property purchase is under £300,000 and you can prove you’re a first-time buyer, you won’t need to pay any stamp duty at all.

When Else Will I Not Have To Pay Stamp Duty?

There are a few other specific situations where you won’t need to pay stamp duty to HMRC. These include:

  • When a property is transferred because of a court order during dissolution, separation, or divorce.
  • Property left to you in a will may not require you to pay stamp duty.
  • Properties that are considered zero-carbon and are worth under £500,000 do not require the payment of stamp duty.
  • If you are gifted a property with no mortgage, or you gift a property you solely own to someone else, stamp duty does not apply.

For more exemptions, take a look at the full list available on the HMRC website.

What About The Stamp Duty Holiday?

The stamp duty holiday was a scheme designed to support the UK housing market and encourage buying properties in England from July 2020 to June 2021.

During this time, anyone purchasing a home for under £500,000 did not have to pay any stamp duty to HMRC.

The continuation of this holiday began from the 1st of July to the 30th of September 2021, with the rates we’ve listed above.

From the 1st of October 2021, all rates will return to normal. Currently, there are no plans for a future holiday, but this doesn’t mean there will not be another one in the future.

Can I Put My Stamp Duty On My Mortgage?

In some cases, you may be able to borrow more on your mortgage to cover the costs of stamp duty. However, this is on a case-by-case basis, and the best thing to do is to speak to a broker or lender directly about this.

If you’re a first-time buyer, you won’t need to pay your stamp duty in many cases, making the need for an increased mortgage far less likely.

stamp duty on mortgage
stamp duty on mortgage

How Do You Pay Stamp Duty?

With all the foundations of stamp duty covered for first-time buyers, it’s time to get into the critical details. Knowing how you pay your tax, when you need to pay it, and the process itself can save you stress later down the line. Here’s how it works:

Completing Your Property Purchase

Before you even look at stamp duty rates, you need to find the property you’d like to purchase. A mortgage broker can let you know how much you can borrow from a suitable lender, whether you’re a first-time buyer, porting, or getting a buy-to-let mortgage.

Once you find your perfect property and your offer is accepted, you can start working with your conveyancer or solicitor on ensuring all taxes and fees are paid – including stamp duty. If you choose to DIY your stamp duty yourself, it’s even more important to know what to expect.

Knowing Your Stamp Duty Rates

Before you begin the process of payment, you’ll need to know exactly how much you owe. We’ve covered all you need to know about current and future stamp duty rates above to ensure you know exactly how much you need to cover – or if you need to cover any at all.

Working With A Solicitor

If you are working with a solicitor or a conveyancer on your property purchase, they will likely talk you through the stamp duty process as well. They will also be able to make payment for you if you owe any money as a first-time buyer.

Making A Stamp Duty Payment Yourself

If you’re choosing to DIY and you’ve calculated that you owe nothing to HMRC based on your criteria, you’ll still need to submit your return stating that information.

You have 14 days to do so following your purchase, so make sure your return is completed as soon as possible.

Filing A Return With HMRC

Filing your stamp duty land tax is easy and can be completed online via the Gov.uk website. To complete your return, you’ll first need to register for the stamp taxes online service.

You should do this as soon as possible, as registration can take up to 10 working days. If you are working with a qualified solicitor, they will do most of this work on your behalf.

Making Your Stamp Duty Payment

As part of your return, you’ll make a payment directly to HMRC for your stamp duty if you need to do so. This payment is also due within the 14-day window following the transaction completion on your property, so make sure anything you owe is paid off as soon as possible.

If you fail to pay within that two-week window, you may be issued a fine.

Changing Land Ownership

Another thing your solicitor or conveyancer will do for you is changing ownership with the land registry. If you’d prefer, you can also opt to do this yourself.

You’ll need to have filed your return with HMRC before you do this, as you will require a certificate to prove you’ve paid any tax owed as part of the changeover process.

Do you have plans to buy a home for the first time? Whether you’re confused about stamp duty or looking for the right lender, Beechwood Mortgages can help.

Our friendly team are here to make your first home purchase as easy as possible. Get in touch today to find out more.

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