HMRC SDLT: SDLTM29830 – Reliefs: First Time Buyers – The purchaser
Principles and Concepts of First Time Buyers Relief
This section of the HMRC internal manual provides guidance on the relief available for first-time buyers. It outlines the eligibility criteria and application process for the relief.
- Eligibility: Defines who qualifies as a first-time buyer.
- Application Process: Steps to apply for the relief.
- Benefits: Details the financial advantages of the relief.
- Limitations: Discusses the restrictions and conditions.
Read the original guidance here:
HMRC SDLT: SDLTM29830 – Reliefs: First Time Buyers – The purchaser
HMRC Guidance on First-Time Buyers’ Relief
Introduction to First-Time Buyers’ Relief
First-time buyers’ relief is a scheme that lets people who are buying their first home pay less or no Stamp Duty Land Tax (SDLT). This financial help was introduced to make it easier for new buyers to enter the property market.
Who Qualifies as a First-Time Buyer?
To qualify for first-time buyers’ relief, you must meet several conditions:
– You must be buying your first home. This means you haven’t owned a property before, either in the UK or internationally.
– You plan to live in the property as your main home, not as a second home or for rental income.
– The price of the property should not exceed £500,000. If the purchase price is higher, you will only receive relief on the first £500,000.
What is Stamp Duty Land Tax (SDLT)?
Stamp Duty Land Tax (SDLT) is a tax paid when you buy a property or land over a certain value. The amount of SDLT you pay depends on:
– The purchase price of the property.
– Whether you are a first-time buyer as per the relief guidelines.
– Any prior home ownership, which may affect your eligibility for relief.
How First-Time Buyers’ Relief Works
If you qualify as a first-time buyer, the relief you can get is £300,000 off your SDLT. Here’s how it works in practical terms:
– If the purchase price is £300,000 or less, you won’t have to pay any Stamp Duty.
– If you buy a property between £300,001 and £500,000, you only pay SDLT on the value over £300,000.
Example 1: Buying a Property Under £300,000
If you buy a property for £250,000 as a first-time buyer:
– You pay no SDLT.
– Total SDLT paid = £0.
Example 2: Buying a Property Between £300,001 and £500,000
If you purchase a property worth £400,000:
– You pay 0% on the first £300,000.
– You only pay SDLT on the remaining £100,000.
The current SDLT rates for purchases over the first £300,000 for first-time buyers is 5%. So:
– SDLT calculation: 5% of £100,000 = £5,000.
– Total SDLT paid = £5,000.
How to Claim First-Time Buyers’ Relief
When completing your SDLT return, you need to indicate that you qualify for the first-time buyers’ relief. Here’s what you do:
1. Fill out the SDLT return form correctly.
2. Indicate that you are a first-time buyer.
3. Provide any required information to verify your status.
This process can typically be completed by your solicitor or conveyancer.
Transfer of Property Between Family Members
If you are a first-time buyer and receive a property as a gift or inherit it, you will not qualify for first-time buyers’ relief if:
– You received the property before the purchase.
– You were legally responsible for any part of the property ownership.
However, if you buy a home from a family member while also being a first-time buyer, you must still meet all the eligibility criteria to claim relief.
What Happens if You Don’t Qualify for First-Time Buyers’ Relief?
If you do not qualify for first-time buyers’ relief, you will pay the regular SDLT rates, which can vary based on the property price. The rates for SDLT vary, and they apply progressively. This means the more expensive the property, the higher percentage you pay on the portion of the price above each threshold.
Example of Regular SDLT By Property Price
Let’s say you buy a property for £600,000:
– The SDLT rates are structured as follows for your property price:
– 0% on the first £250,000
– 2% on the next £675,000 (the portion between £250,001 and £925,000)
Therefore:
– You will pay SDLT as follows:
– 0% on £250,000 = £0
– 2% on the next £350,000 = £7,000
So, the total SDLT will be £7,000 for a purchase of £600,000 if you do not qualify for first-time buyers’ relief.
Important Considerations
Before making a claim for first-time buyers’ relief, keep in mind:
– The relief is only available for residential properties.
– There are specific criteria regarding ownership and occupation to ensure that you truly qualify as a first-time buyer.
Common Misconceptions
1. I can buy any property and still be a first-time buyer.
– Not true. The property must be your first residential home.
2. I can claim relief if I’ve owned a buy-to-let property before.
– If you have owned any property at all, including buy-to-let investments, you won’t qualify for first-time buyers’ relief.
When to Seek Professional Advice
If you have any doubts about your eligibility for the first-time buyers’ relief or how SDLT applies to your situation, consider seeking advice from:
– A solicitor or conveyancer with experience in property transactions.
– A tax adviser knowledgeable about SDLT.
Professional advice can save you time and money while helping ensure the successful purchase of your new home.
Property Purchase Process Overview
Understanding the steps to buy a property as a first-time buyer can also help you prepare for the financial obligations, including SDLT. Here’s a simple outline of the steps to follow:
1. Get Your Finances in Order:
– Review your savings, income, and budget.
– Get a mortgage agreement in principle if borrowing funds.
2. Start House Hunting:
– Look for properties within your budget and preferred areas.
– Consider contacting estate agents for assistance.
3. Make an Offer:
– Once you find a property, make an offer through the estate agent.
– Negotiate as needed until both parties agree on a price.
4. Instruct a Solicitor or Conveyancer:
– Once your offer is accepted, hire a professional to handle the legal aspects of the purchase.
5. Arrange a Survey:
– A survey can ensure that the property is in good condition before you complete the purchase.
6. Complete the Purchase:
– Exchange contracts with the seller, pay any required deposit, and agree on a completion date.
7. Register the Property:
– After you complete the purchase, register your ownership with the Land Registry.
8. Submit Your SDLT Return:
– You must complete and submit your SDLT return within 14 days of your completion date, even if you qualify for relief.
For more information about first-time buyers’ relief, visit the official pages such as SDLTM29830 – Reliefs: First Time Buyers – The purchaser.
Understanding SDLT and first-time buyers’ relief can help you make the most of your budget and enjoy your new home without unexpected financial burdens.