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Stamp Duty Land Tax: relief for first time buyers

Sykes Anderson Perry explains the Stamp Duty changes announced on 22nd November 2017

Please note that the information herein is of a general nature and you should not act or refrain from acting on it without professional advice on the specific facts of your case. No liability is accepted by the author or Sykes Anderson Perry Limited in respect of this article. Taxation and property law are complex subjects and the above is a basic outline only and is intended only as a general guide. Nothing herein constitutes financial advice.

Contact people at Sykes Anderson Perry for more information:

Laurie Davison, Gemma Wright or David Anderson

Summary

  • From 22 November 2017 first time buyers paying £300,000 or less for a residential property will pay no Stamp Duty Land Tax (SDLT).

  • First time buyers paying between £300,000 and £500,000 will pay SDLT at 5% on the amount of the purchase price in excess of £300,000.

  • For example, on a £400,000 purchase, SDLT would only be charged on the £100,000 excess, at 5%, giving a total of £5,000 payable.

  • The HMRC online calculator has already been updated, and you can find it here; https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

Who is classed as a First Time Buyer?

  • A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world.

  • If there is more than one buyer, they must all be defined as first time buyers to claim relief.

    From when does this apply?

  • This measure has effect for transactions with an effective date on or after 22 November 2017.

  • The relief must be claimed in an SDLT return, or by amending such a return.

Requirements

  • Relief only applies to first time buyers who intend to occupy the property as their only or main residence. It appears the property could be rented after purchased provided the buyer intends to occupy it eventually as his main residence.

  • Relief cannot be claimed if the transaction counts as a “higher rate transaction” for any other reason. This means that you are caught by the 3% surcharge which applies to people who already own a property.

  • First time buyers purchasing property for more than £500,000 will not be entitled to any relief and will pay SDLT at the normal rates.

  • The purchase transaction cannot be linked to any other land transaction. (Unless that other linked transaction consists of 1) an interest in land which forms part of the garden or grounds of the dwelling being purchased; or 2) an interest in, or right over, land subsisting for the benefit of the dwelling or of the gardens or grounds of the dwelling being purchased.

  • Relief will be withdrawn where a later linked transaction has the effect of making the earlier transaction ineligible for relief. (An example might be where the later transaction takes the relevant consideration above the £500,000 limit, or includes the acquisition of another dwelling.) In these circumstances additional tax becomes payable on the earlier transaction as if the claim had not been made and a further SDLT return must be delivered.

I am buying a shared ownership property, how am I affected?

  • A claim to first-time buyers’ relief is available for purchases under a shared ownership lease or shared ownership trust, but only where the purchaser elects to pay SDLT on the full market value in a one off payment up-front.

Other Points

  • There is no restriction on parents either lending or giving money to their children to purchase the property. This should be documented to avoid difficulties with the child being seen as a nominee for the parent who is actually the beneficial owner.

  • Parents can be guarantors to a child’s mortgage.

  • Parents can be on the deeds as an owner (for instance if this is a requirement of the lending bank) provided it is clear they have no beneficial interest in the property. A declaration of trust should be signed making this clear.

  • The position for first time buyers under 18 is more complex.

Portion of consideration Current standard rates Rate for first time buyers
Up to £125,000 0 0
Over £125,000 and up to £250,000 2% 0
Over £250,000 and up to £300,000 5% 0
Over £300,000 and up to £500,000 5% 5%
Rate for first time buyers


November 2017
David Anderson
Solicitor-Advocate and Chartered Tax Adviser Sykes Anderson Perry Limited