HMRC SDLT: SDLTM29820 – Reliefs: First Time Buyers – Conditions applying to the land

Principles and Concepts of SDLTM29820 – Reliefs for First Time Buyers

This section of the HMRC internal manual outlines the conditions related to land that apply to reliefs for first-time buyers. It provides guidance on the eligibility criteria and procedural requirements for claiming these reliefs.

  • Details the specific conditions under which first-time buyers can claim relief.
  • Explains the types of land transactions that qualify for relief.
  • Provides procedural guidance for applying for the relief.
  • Clarifies eligibility criteria for first-time buyers.

Understanding Reliefs for First Time Buyers

If you are a first-time buyer of a property, you may be eligible for certain reliefs when it comes to paying Stamp Duty Land Tax (SDLT). This article explains the conditions that apply to these reliefs and what you need to know to benefit from them.

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax (SDLT) is a tax you pay when you buy property or land over a certain price in England, Wales, and Northern Ireland. The rates of tax depend on the price of the property. As a first-time buyer, you may qualify for relief that reduces the amount of SDLT you have to pay.

Who is considered a First-Time Buyer?

A first-time buyer is someone who has never owned a property before. This includes:

  • Purchasing a property in the UK or anywhere else in the world.
  • Owning a share in a property (for example, through shared ownership or a family home).
  • Receiving a gift of property.

In addition, to qualify for the first-time buyer relief, both you and your partner (if you are buying together) must meet the criteria of being first-time buyers. If either buyer has owned a property before, the relief does not apply.

Conditions for First-Time Buyer Relief

If you want to take advantage of the relief, you need to meet specific conditions:

  • The property must be bought for £500,000 or less. If the price is higher, you will pay standard SDLT rates.
  • The relief only applies to the purchase of a freehold or leasehold interest in a residential property. It does not apply to non-residential land or properties.
  • The property must be your main residence. You cannot claim relief if you are purchasing a second property or an investment property.

How Much Relief Can You Get?

The amount of relief available to first-time buyers depends on the purchase price of the property:

  • For properties costing up to £300,000, no SDLT is due.
  • If the property value is between £300,001 and £500,000, you will pay a reduced rate. The first £300,000 is liable for no tax, and you will pay 5% on the amount above £300,000.
  • If the price exceeds £500,000, the first-time buyer relief does not apply, and standard SDLT rates will need to be paid.

Examples of How the Relief Works

Here are a few examples to demonstrate how the first-time buyer relief operates:

  • Example 1: You buy your first home for £250,000. Since the price is below £300,000, you do not pay any SDLT.
  • Example 2: You buy a house for £400,000. You pay no tax on the first £300,000. For the remaining £100,000, you are charged 5%, which means you pay £5,000 in SDLT.
  • Example 3: You find a property for £550,000. Since this amount exceeds the £500,000 threshold, you will not receive first-time buyer relief and will need to pay SDLT at the standard rate on the full amount.

Claiming the Relief

When purchasing a property, you will need to complete a SDLT return. To claim the first-time buyer relief, you must provide the following information:

  • Details of the qualifying property.
  • Evidences of being a first-time buyer—this can include declarations on the SDLT return form.
  • Any additional documentation as required, which may be asked by HMRC.

The relief is applied automatically when you complete the SDLT return. You will not receive a separate refund; the relief is calculated before you submit your payment. Ensure that all information is accurate to avoid any potential issues.

What Happens If You Don’t Qualify?

If you do not meet the conditions to claim the first-time buyer relief, you are required to pay the full SDLT owing based on the standard rates. This means:

  • If your property costs over £500,000, you need to refer to the standard tax bands applicable.
  • If either you or your partner is not a first-time buyer, then the relief cannot be applied even if you meet other criteria.

Subsequently Selling Your Home

Once you have bought your first property and claimed the relief, should you sell this property and buy another, you will not be eligible for the first-time buyer relief again. The same condition applies to individuals who buy a new main residence: if they are not first-time buyers, they must adhere to standard SDLT rates.

Additional Considerations

Here are some additional points to keep in mind:

  • Joint Purchases: If buying with someone else, both parties have to be first-time buyers to qualify for the relief. If only one buyer has owned a property before, the relief doesn’t apply.
  • Shared Ownership: If you are buying a share in a housing association property, you might still qualify for relief if you meet the other conditions above.
  • New Build Properties: You can also claim first-time buyer relief when purchasing new build homes, provided you meet all the eligibility criteria.

Other Available Reliefs

First-time buyer relief is just one form of support available to property buyers. Depending on your situation, there may be other reliefs or schemes you can look into:

  • Help to Buy: This is a government scheme that helps first-time buyers with purchasing a new build home through shared equity loans.
  • Lifetime ISA: This investment account helps you save for your first home with tax-free growth and a government bonus.
  • Shared Ownership: This allows you to buy a share of a property and pay rent on the remaining share. It is designed to make home ownership more affordable.

Understanding the first-time buyer relief and the associated conditions is an essential part of managing your property purchase. Make sure to do your research and consider consulting a financial or tax advisor for guidance tailored to your situation.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM29820 – Reliefs: First Time Buyers – Conditions applying to the land

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Written by Land Tax Expert Nick Garner.
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