HMRC SDLT: SDLTM29810 – Reliefs: First Time Buyers – General overview: FA03/S57AA/S73CA

First Time Buyers Relief Overview

This section of the HMRC internal manual provides a general overview of the reliefs available for first-time buyers under FA03/S57AA/S73CA. It outlines the principles and concepts associated with these reliefs.

• Relief eligibility criteria for first-time buyers.
• Details on the application process for reliefs.
• Explanation of the legislative framework governing these reliefs.
• Guidance on compliance and documentation requirements.

Reliefs for First Time Buyers

Overview of First Time Buyer Relief

First time buyers can benefit from a special stamp duty relief in the UK. This is designed to help people who are purchasing their first home and makes the buying process more affordable. The relief means that first time buyers might not have to pay any stamp duty at all, depending on the price of the property.

Key Definitions

– First Time Buyer: This refers to someone who has never owned a property before, either in the UK or abroad. To qualify for relief, buyers must use the property as their main home.

– Stamp Duty Land Tax (SDLT): This is a tax paid on properties bought over a certain price in England and Northern Ireland. The amount of tax due depends on the value of the property.

Eligibility Criteria for First Time Buyer Relief

To qualify for first time buyer relief, certain conditions must be met:

– The property being purchased must be a residential property.

– The purchase price must not exceed £500,000. If the property’s price is above this amount, the buyer will not qualify for the relief.

– The buyer must intend to live in the property as their main home.

– A property can include a flat or a house, but it must not be an investment property or a second home.

– Both buyers must be first time buyers, so if one person has owned a property before, they cannot claim the relief.

How the Relief Works

The way first time buyer relief is applied depends on the price of the property. Here’s how it generally works:

– For properties costing up to £300,000: First time buyers pay no SDLT. If the property’s price is exactly at this amount, the full relief applies.

– For properties priced between £300,001 and £500,000: The first £300,000 is exempt from SDLT. However, any amount above this threshold will incur tax at the standard rates for other buyers.

– Properties costing more than £500,000 do not qualify for any first time buyer relief and will be taxed at the normal SDLT rates.

Examples of First Time Buyer Relief

Consider two scenarios to explain the relief in clearer terms:

1. Property Purchase at £280,000:
– As the property price is under £300,000, the first time buyer does not pay any SDLT.
– Total SDLT = £0.

2. Property Purchase at £350,000:
– The first £300,000 is tax-free, and the buyer will need to pay SDLT on the remaining £50,000.
– For this amount, the SDLT rate is 0% for the first £300,000 and 2% on the next £50,000.
– Total SDLT = £50,000 x 2% = £1,000.

Important Information on How to Claim Relief

To claim relief as a first time buyer, here are the steps:

1. Complete the SDLT Return: When you buy a property, you must fill out the SDLT return form. This form is usually completed by your solicitor or conveyancer.

2. Indicate First Time Buyer Status: On the SDLT return, it’s essential to check the box that shows you are a first time buyer. This indicates that you are eligible for the relief.

3. Provide Necessary Proof: You may need to provide details that prove your first time buyer status, such as identification documents.

4. Claim the Relief in the SDLT Return: When your return is submitted, if you qualify, the relief will be automatically applied.

Interaction with Other Reliefs and Allowances

The first time buyer relief can interact with other types of reliefs. For example:

– Help to Buy: Many first time buyers may use schemes like Help to Buy. Those purchasing under these schemes can still claim first time buyer relief, making the overall purchase less expensive.

– Shared Ownership: First time buyers utilizing shared ownership will need to calculate the relief based on the share of the property they are buying, as this may affect how SDLT is applied.

Exemptions and Special Cases

Certain circumstances can affect eligibility for the first time buyer relief:

– Inheritance: If an individual inherits a property, even if they never lived there, they are not considered a first time buyer when they buy their own property in the future.

– Commercial Properties: Buying a commercial property or mixed-use property will disqualify the buyer from receiving first time buyer relief.

– Previous Property Ownership: If someone owned a property in the past but no longer does, they do not qualify for first time buyer relief, regardless of how long it has been since they owned it.

Consequences of Misclaiming Relief

Claiming relief incorrectly can lead to problems. If, for any reason, it turns out that a buyer does not qualify for the first time buyer relief after claiming it:

– HMRC can demand that the unpaid SDLT is paid, plus it may also apply penalties and interest.

– It is important to ensure eligibility before submitting the SDLT return to avoid these risks.

Important Resources and Links

For more information about first time buyer relief and SDLT, refer to the official HMRC documentation. You can find specific guidance on this topic at SDLTM29810.

This resource includes a general overview of the relief, as well as updates and examples to assist you in understanding how this can affect your purchase as a first time buyer.

For any further questions or uncertainties, it is advisable to consult a tax professional or advisor familiar with property transactions to ensure that you are correctly informed about your rights and responsibilities as a first time buyer.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM29810 – Reliefs: First Time Buyers – General overview: FA03/S57AA/S73CA

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