Stamp duty, sometimes known as Stamp Duty Land Tax (SDLT) to give it its full name, is a tax that must be paid if the price of the property (or land) that is being purchased in Northern Ireland or England is more than a certain threshold. Scotland and Wales impose taxes comparable to those in England but under different titles.
If the price of your new property is less than the threshold for stamp duty, which is currently set at £250,000, you will not be required to pay stamp tax. However, if the purchase price exceeds the threshold, the amount of stamp duty you must pay is determined by rate bands. The more costly the property, the higher the stamp duty you must pay.
It is essential to note that the amount of stamp duty owed is determined by the percentage of the purchase price that falls within each band rather than having the highest rate associated with the band that you fall into that is applied to the whole purchase price. It was stated in the Autumn Statement 2022 that the broader nil-rate threshold will be reduced to £125,000 with effect from the first day of April 2025. This change will take place.
How To Pay Stamp Duty
The HMRC must receive your stamp duty payment within 14 calendar days after finalizing your acquisition. In most cases, your solicitor will finish the required documentation, pay for it on your behalf, and add the cost to your charge. If you are responsible for making payment arrangements, the HMRC website allows you to submit and make payments online.
What Is First-Time Buyer Stamp Duty Relief?
The government implemented the first-time buyer stamp duty reduction in November 2017 to assist those who had difficulty meeting the initial fees associated with purchasing their first house.
Consequently, a greater stamp duty threshold applies if you fit the criteria for being considered a first-time buyer. If you are a first-time buyer and purchase a home valued at less than £425,000, you will not be required to pay any stamp duty at this time. As a result of a statement made in the Autumn Statement 2022, it is anticipated that this would decrease to £300,000 beginning on April 1, 2025.
It is important to keep in mind that even if you do not owe any stamp duty, you are still required by HMRC to file a return even if you do not have any money owed. Again, this is something that your attorney would typically take care of for you.
Who Is Considered A First-Time Homebuyer?
You must purchase a home to make it your primary residence to be considered a first-time buyer. Additionally, this must be the first piece of real estate you have owned anywhere in the globe, including the United Kingdom. You will not be eligible for first-time buyer stamp duty reduction if you plan to use your new home as a buy-to-let investment, if you have previously inherited or been given a residential property, or if you have previously owned a residential property.
If you are purchasing a home with another person, you must fulfill the criteria for being a first-time buyer to be eligible for the assistance. This means neither of you is eligible for relief if you once owned a residence jointly with a partner or spouse. This is true regardless of whether you were a tenant in common or a tenant in joint tenancy at the time.
Stamp Duty Rates For First-Time Homebuyers
No stamp duty must be paid on the purchase of a home by first-time purchasers who spend up to £425,000 for a residence. If you pay between £425,000 and £625,000 for the property, you will be subject to an additional 5% stamp duty on the purchase price higher than £425,000. For instance, if you are a first-time buyer and purchase a home with a price tag of £475,000, the stamp duty you will be required to pay is £2,500 (5% of £50,000).
However, if a first house costs more than £625,000, the first-time buyer stamp duty discount is unavailable, and the usual stamp duty rates must be paid instead. Beginning April 1, 2025, this will be reduced to £500,000, coinciding with the reinstatement of the nil-rate band for first-time purchasers to the previous level of £300,000.
