HMRC SDLT: SDLTM29850 – Reliefs: First Time Buyers – Circumstances where we consider that the relief can be claimed

Principles and Concepts of First Time Buyers Relief

This section of the HMRC internal manual outlines the conditions under which first-time buyers can claim relief. It provides guidance on eligibility criteria and the application process.

Eligibility: Defines who qualifies as a first-time buyer.
Relief Conditions: Details specific circumstances allowing relief claims.
Application Process: Explains steps to apply for the relief.
Documentation: Lists necessary documents for claim submission.

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Read the original guidance here:
HMRC SDLT: SDLTM29850 – Reliefs: First Time Buyers – Circumstances where we consider that the relief can be claimed

HMRC Guidance on First Time Buyer Relief

Introduction to First Time Buyer Relief

The First Time Buyer Relief is a significant benefit for individuals who are purchasing their first home. This relief reduces the amount of Stamp Duty Land Tax (SDLT) that must be paid when buying a property. Understanding the rules and conditions surrounding this relief is crucial for first-time buyers to take full advantage of the savings available.

What is First Time Buyer Relief?

First Time Buyer Relief allows eligible buyers to pay reduced SDLT rates when they purchase their first residential property. The relief is designed to make it easier for individuals to purchase their first home by lowering the costs associated with buying property.

When can you claim First Time Buyer Relief?

You can claim the First Time Buyer Relief if you meet certain conditions:

You must be a first-time buyer, meaning you have never owned an interest in a residential property anywhere in the world.
The purchase must be your only home. You cannot claim the relief if you own another home or if you are purchasing the property with someone who is not a first-time buyer.
The property must cost no more than £625,000. If the property costs more than this, the relief will not apply to the full amount.

Who qualifies as a First Time Buyer?

To qualify as a first-time buyer, you must meet the following criteria:

You have never owned property before, either in the UK or abroad.
You must be at least 18 years old to enter into a contract for a property purchase.
You need to be making the purchase alongside one or more individuals who also meet the first-time buyer criteria if you are sharing the mortgage and buying together.

How much relief can you receive?

The amount of SDLT you save depends on the price of the property. Here is how the rates work:

– If the property costs up to £300,000, you will not have to pay any SDLT at all.
– For properties costing between £300,001 and £625,000:
– You pay 0% on the first £300,000
– You pay 5% on the portion from £300,001 to £625,000

For example:
– If you buy a property for £300,000, your SDLT bill will be £0.
– If you buy a property for £400,000:
– You pay 0% on the first £300,000 = £0
– You pay 5% on the next £100,000 = £5,000
– Your total SDLT will be £5,000.

Special Circumstances for Relief

There are certain situations where you can also claim First Time Buyer Relief even if you may not meet the standard criteria. These include:

– If you inherit a property but have never owned one prior to that.
– If you have previously owned shares in a property as part of a larger investment but have never owned a residential home in your name.

How to Claim the Relief?

To claim the First Time Buyer Relief, follow these steps:

1. Include it in your SDLT return: When completing the SDLT return, you must fill out the section concerning reliefs and indicate that you are a first-time buyer.

2. Provide Necessary Information: You will need to provide evidence to support your claim. This may include details about your purchase and any documents proving your eligibility.

3. Ensure Accurate Information: Make sure all the details you provide are correct. If incorrect information is provided, HMRC may revoke your relief.

Pitfalls to Avoid

There are some common mistakes to watch for when claiming First Time Buyer Relief:

Assuming all properties qualify: Not all properties are eligible for First Time Buyer Relief. Make sure the property you are purchasing falls within the price limits and that you meet the eligibility criteria.
Not declaring previous ownership: If you have owned a property before, even if it was inherited or sold a long time ago, you may not be eligible for the relief.
Purchasing with someone who has owned a property: If you buy with someone who is not a first-time buyer, you will not be able to claim the relief.

What if You Don’t Qualify?

If you find that you do not qualify for First Time Buyer Relief, you will have to pay the standard SDLT rates. Make sure to budget for this additional cost when purchasing your property.

Example of How to Calculate Your SDLT Without Relief

If you are a second-time buyer purchasing a home for £400,000, your SDLT calculation would be as follows:

– The first £125,000 is taxed at 0% = £0
– The next £125,000 (from £125,001 to £250,000) is taxed at 2% = £2,500
– The next £150,000 (from £250,001 to £400,000) is taxed at 5% = £7,500
– Total SDLT will be £10,000.

Important Notes

– Keep accurate records of your eligibility and any documentation you submit with your SDLT return.
– If it is later discovered you were not eligible for the relief, you may have to pay the additional SDLT that was not initially paid.

For further information about specific situations regarding the First Time Buyer Relief, you can refer to the official guidance from HMRC, particularly on situations where the relief can be claimed. In particular, visit SDLTM29850 – Reliefs: First Time Buyers – Circumstances where we consider that the relief can be claimed.

Conclusion

Overall, understanding the First Time Buyer Relief and the eligibility criteria is vital for anyone considering purchasing their first property. The savings and benefits of this relief can be significant and can help make the journey into home ownership more accessible. Always consult with your solicitor or HMRC if you are uncertain about your eligibility or the process.