HMRC SDLT: SDLTM29840 – Reliefs: First Time Buyers – Other reliefs

Principles and Concepts of First Time Buyers Relief

This section of the HMRC internal manual provides guidance on reliefs available to first-time buyers. It outlines the eligibility criteria and application process for these reliefs.

• Eligibility: Criteria that determine who qualifies as a first-time buyer.
• Application Process: Steps to apply for the reliefs.
• Other Reliefs: Information on additional reliefs available to first-time buyers.
• HMRC Guidelines: Compliance with HMRC regulations and procedures.

Understanding Stamp Duty Reliefs for First-Time Buyers

Buying your first home is a significant achievement, and there are measures in place to help make it more affordable. One such measure is the relief on Stamp Duty Land Tax (SDLT). This article provides an overview of SDLT reliefs for first-time buyers, helping you understand what they are, how to qualify, and the impact on your home purchase.

What is Stamp Duty Land Tax (SDLT)?

Stamp Duty Land Tax (SDLT) is a tax you have to pay when you buy property in England and Northern Ireland. The amount you pay usually depends on the price of the property. However, there are relief options available for certain buyers, notably first-time buyers.

What is the First-Time Buyer Relief?

The First-Time Buyer Relief allows eligible individuals to pay less or even no SDLT when purchasing their first home. This relief is aimed at making it easier for first-time buyers to get onto the property ladder.

Who Qualifies for First-Time Buyer Relief?

To qualify for this relief, you must meet certain conditions:

• You must be a first-time buyer. This means you have never owned a property or land in the UK or overseas.
• All buyers must be first-time buyers if there is more than one buyer involved in the purchase.
• The property must be residential and your main home.
• The purchase price must be £500,000 or less.

How Does the Relief Work?

The relief works by reducing the amount of SDLT you have to pay. Here are the main points:

• If you buy a property for £300,000 or less, you won’t pay any SDLT.
• If you buy a property for more than £300,000 but less than £500,000, you will receive tapered relief. This means you will pay a reduced rate on the portion above £300,000.

Example of Tapered Relief:

Let’s say you buy a property for £400,000:

– You pay no SDLT on the first £300,000.
– You pay 5% on the remaining £100,000, which equals £5,000.

Total SDLT to pay would be £5,000.

What Happens if the Property Price Exceeds £500,000?

If the property you are buying costs more than £500,000, you will not qualify for first-time buyer relief, and you will have to pay the standard rates of SDLT. These rates are tiered based on the purchase price.

Example of Paying Standard Rates:

If you buy a home for £600,000, the SDLT you will need to pay is calculated using the standard rates:

– No tax on the first £250,000.
– 5% on the next £250,000 (£12,500).
– 10% on the final £100,000 (£10,000).

Total SDLT to pay would be £22,500.

Other Considerations for First-Time Buyers

While the first-time buyer relief is significant, you should also consider other factors when purchasing a home:

• Shared Ownership Schemes: If you buy a share of a property through a shared ownership scheme, the first-time buyer relief can also apply. The relief will be calculated based on the share you are purchasing rather than the property’s full value.
• Help to Buy Schemes: If you are using a Help to Buy scheme, such as an equity loan, you may still qualify for first-time buyer relief, provided you meet all the eligibility criteria.
• Other Reliefs: There are other reliefs and exemptions available, such as for disabled buyers or those purchasing a property from family members, but these may have different eligibility criteria.

How to Claim First-Time Buyer Relief

Claiming the First-Time Buyer Relief is straightforward:

• You need to complete a SDLT return when buying your home. This can be done online through HMRC’s website or through your solicitor.
• During the SDLT return, indicate that you are eligible for first-time buyer relief. You will need to confirm that you meet all the qualification criteria.
• If you are using a solicitor, they can assist you with this process and ensure that the return is submitted correctly.

When is the Deadline for Payment?

Payment of SDLT is required within 14 days of completing the purchase of your property. Failing to pay on time can result in penalties or interest charges. Always ensure you are aware of your payment timeline to avoid any issues.

What if Your Circumstances Change?

If your situation changes, for instance, if you do not end up living in the property as your main home, it may affect your SDLT status. Here are some scenarios to consider:

• If you rent out the property or it ceases to be your main home, you may have to pay additional SDLT on a future property purchase.
• If any of the buyers in a joint purchase do not meet the first-time buyer criteria, the relief will not apply.

Where to Get More Information

If you want more detail about first-time buyer relief and SDLT, you can check out the official HMRC guidance and related resources. For a specific case reference, visit SDLTM29840 – Reliefs: First Time Buyers – Other reliefs. This page provides in-depth information about the reliefs and other considerations for first-time buyers.

Things to Remember

– The First-Time Buyer Relief applies to properties costing £500,000 or less.
– Make sure you meet all qualifying criteria to benefit from the relief.
– Complete your SDLT return accurately and on time to avoid penalties.

Buying your first home can be an overwhelming process, but understanding the available reliefs can make it more manageable. Being informed about the regulations and their requirements helps you make the best financial decisions when purchasing your property.

Useful article? You may find it helpful to read the original guidance here: HMRC SDLT: SDLTM29840 – Reliefs: First Time Buyers – Other reliefs

View all HMRC SDLT Guidance Pages Here