As an increasing number of first-time buyers are looking to purchase their own home, they’re soon realising that there are a number of costs involved. Between house deposits, solicitor fees, and mortgage repayments, buying a property takes a lot of investment.
However, the government’s first-time buyers’ stamp duty relief makes it so there’s one less cost to think about. In the UK, the average first home costs buyers’ £288,000, which is way below the stamp duty relief threshold and means most first time buyers benefit from the significant cost savings of this initiative.
Let’s take a look at how stamp duty impacts first-time buyers and if you’re eligible for exemption…
- What is stamp duty?
- Do first-time buyers pay stamp duty?
- What are the stamp duty rates?
- Are you eligible for the first-time buyer tax relief?
- When do first-time buyers have to pay stamp duty?
- Does stamp duty change for shared ownership properties?
- What stamp duty rules apply for first-time buyers in Scotland and Wales?
What is stamp duty?
Stamp Duty Land Tax (SDLT) is a tax paid by homebuyers when they purchase a property or land. It is a banded tax relating to the overall cost of a property and applies to all property transactions whether the buyer is using cash or a mortgage. It is worth noting that different rules apply in Scotland and Wales.
Stamp duty is calculated as a percentage of the property you’re buying, which means the higher the value of the property, the more stamp duty tax you’ll pay.
Do first-time buyers pay stamp duty?
The answer to whether you have to pay stamp duty as a first-time buyer all depends on the price of the property you’re purchasing. As a first-time buyer, you don’t have to pay stamp duty on properties worth up to £425,000. So, if you buy a property for less than £425,000, then no, you don’t have to pay any stamp duty. This tax break applies to both freehold and leasehold properties, as long as the lease has at least 21 years on it.
Meanwhile, if your first home is worth more than £425,000, yes you have to pay 5% stamp duty for properties up to £625,000. If your first property purchase is worth more than £625,000, first-time buyer stamp duty exemptions no longer apply to you.
Note: In 2020, Stamp duty was cut to zero for residential property purchases in England and Northern Ireland up to £500,000. This lasted from 8 July 2020 until 31 March 2021, so is no longer available.
What are the stamp duty rates?
Stamp duty applies to properties with a value of more than £250,000 in the UK (correct for June 2024). However, if you’re a first-time buyer, you only pay stamp duty on properties worth more than £425,000 at which point you’ll pay 5% SDLT on the portion between £425,001 to £625,000.
Stamp duty rates for first-time buyers
| Property Value | First Time Buyer Stamp Duty Rates |
| Up to £425,000 | 0% |
| The portion from £425,001 to £625,000 | 5% |
| £625,000 or more | Regular stamp duty rates |
First-time buyer stamp duty example
Let’s assume you’re a first-time buyer, purchasing a property valued at £500,000. The first £425,000 of your property is exempt from the stamp duty tax, so:
- First £425,000: 0% x £425,000 = £0
You’ll only pay stamp duty on the remaining £75,000, so:
- Remaining £75,000: 5% x £75,000 = £3,750
Calculate how much stamp duty tax you need to pay on your property using the government’s SDLT calculator.
Are you eligible for the first-time buyer tax relief?
To be eligible for the first-time buyer tax relief, you must ensure the following:
- You’re purchasing your first property
- You’ve never owned a property or share of property before, even if it was inherited
- You’ll ensure the property is your only or main residence, that you plan to live in
- The property purchase must be less than £625,000
- Anyone you’re buying the property with must also meet the above criteria
When do first-time buyers have to pay stamp duty?
You must pay your stamp duty tax within 14 days of completion on your new property purchase. Typically, the process of paying stamp duty will be taken care of by your conveyancer, whereby they’ll send the SDLT return to HMRC and funds on your behalf.
Unless you’re buying a new home through the shared ownership scheme, your stamp duty cannot be paid in instalments and must be paid in full within that 14-day period.
Need some help making your stamp duty transfer? Learn more about paying your stamp duty.
Does stamp duty change for shared ownership properties?
Yes, as outlined above, stamp duty for shared ownership properties differs slightly in how and when you pay it. You have the choice of either paying the tax in full for the whole market value of the property, like usual. Alternatively, you can pay the stamp duty based on the share value you’ve purchased. You then won’t make any other stamp duty payments until you own at least 80% of the property.
Just like any other first-time buyer stamp duty relief, the shared ownership property must be less than £625,000 to qualify for the exemption.
Learn more about stamp duty for shared ownership properties.
What stamp duty rules apply for first-time buyers in Scotland and Wales?
Stamp duty does apply for buyers in Scotland and Wales, however, it differs from England and is known under a different name.
Stamp duty for first-time buyers in Scotland
In Scotland, the equivalent of stamp duty is called the Land and Buildings Transaction Tax. The rates are as follows:
| Property price | Land and Buildings Transaction Tax rates |
| £0 – £145,000 | 0% |
| £145,000 to £250,000 | 2% |
| £250,000 to £325,000 | 5% |
| £325,000 to £750,000 | 10% |
| Over £750,000 | 12% |
Stamp duty for first-time buyers in Wales
In Wales, stamp duty is known as the Land Transaction Tax and the rates are as follows:
| Property price | Land Transaction Tax rates |
| £0 – £225,000 | 0% |
| £225,000 – £400,000 | 6% |
| £400,000 – £750,000 | 7.5% |
| £750,000 – £1,500,000 | 10% |
| £1.5m+ | 12% |
