HMRC has released a report highlighting the effect of stamp duty relief for first-time buyers (FTBs) following its introduction in 2017.
The report estimates the efficacy of the 2017 First Time Buyers’ Relief in incentivising FTB property transactions in England and Northern Ireland and looks at the below criteria to evaluate the success of this relief: The impact on transaction volumes of FTBs; and, The impact on prices paid by FTBs. A relief from stamp duty for FTBs was announced in 2017 by the then Chancellor, Philip Hammond, as part of the Autumn Budget.
This meant that FTBs was fully exempt from paying Stamp Duty Land Tax (SDLT) on properties up to the value of £300,000. Since its introduction, the relief has been subject to several changes; however, HMRC has revealed that in the £125,001 to £300,000 band, the SDLT relief was responsible for in an 11pc increase in purchases and an 18pc increase in the £300,001 to £500,000 band. In 2022/23, UK government raised over £1,017bn in receipts.
This is equivalent to around 40pc of the size of the UK economy, which is the highest level since the 1980s.
Most receipts come from three main sources: income tax, National Insurance contributions (NICs) and value added tax (VAT).
Together they raised around £586bn in 2022/23. Coventry Building Society revealed that in 2022, more than £16bn of stamp duty was paid by homeowners in England.
This represents a 23pc increase on the previous 12 months.
What is SDLT?
When you buy a property in the UK, stamp duty is a tax that’s charged depending on the value of the property and where it is in the UK. Stamp duty rates vary depending on where in the UK the property is.
The rates at which stamp duty is charged across the UK nations is subject to a progressive rate system.
This means that a portion of the property may be subject to one rate of stamp duty and another portion is subject to a different rate rather than the entire property being subject to one rate.
How much stamp duty do first-time buyers pay?
Important: for the purposes of stamp duty, a buyer would not qualify as a FTB if they have ever owned, or part-owned, a property in the UK or abroad.
This includes property that has been inherited – even if it was sold it straightaway and never lived in.
In England and Northern Ireland there is no stamp duty for first-time buyers on the first £425,000 of a main residential property (provided the property costs £625,000 or less).
If a new home is worth £425,001 to £625,000, a buyer will pay 5% stamp duty, but only on the value above £425,000.
For example, if a buyer were to pay £500,000 for their first home, they would have a £3,750 stamp duty tax bill, representing 5% of the £75,000 above the £425,000 relief cut-off.
It’s worth noting that stamp duty is set to change again in April 2025 according to the government’s autumn 2022 budget.
When must stamp duty be paid?
In England or Northern Ireland, a buyer has 14 days from the date of completion/date of entry (when all the contracts are signed and dated, and you get the keys) to pay stamp duty. In Scotland and Wales, buyers have 30 days.
Note: fines may be imposed if stamp duty is not paid in time, so buyers should be aware of this.
Solicitors will usually sort this out; however, legally it is the buyer’s responsibility to ensure their tax is paid.