Stamp Duty Break for First Time Buyers

In his November budget, the Chancellor announced the immediate abolition of stamp duty land tax (SDLT) for first time buyers purchasing properties up to £300,000. First time buyers purchasing a home for consideration of £300,000 to £500,000 will still have stamp duty to pay but their SDLT liability will be reduced by £5,000. Mr Hammond has introduced this tax relief to address the UK’s housing crisis and to help first time buyers to get on the housing market, recognising that one of the biggest challenges for first time buyers is having the upfront cash required. This is a welcomed move among first time buyers as it could save them up to £5,000.

This new relief from SDLT will apply if you are buying your first home and the purchase completes on or after 22 November 2017. If the purchase price is more than £500,000, the relief will not be available. It also won’t be available if you or anyone else buying the property is not a first time buyer or if the property is situated in Scotland.

This tax relief has been criticised with the Office for Budget Responsibility (OBR) advising this tax break is likely to push property prices up by approximately 0.3%, with the largest increase being in 2018. The OBR commented, “The main gainers from the policy are people who already own property, not the first time buyers themselves.”

Also the stamp duty cut is most likely to favour those living in the south of England where house prices are more expensive. Those living in Northern Ireland where the previous stamp duty threshold of £125,000 is barely above the first time average price, will see little or no benefit of this new tax relief.

Soaring deposits and house prices mean affordability remains a large issue for young people looking to get onto the property ladder, with many having to rely on the bank of Mum and Dad. Although this is a move in the right direction, it is unlikely to make much of a dent in the overall costs for the average first time buyer, particularly in Northern Ireland.

Mr Hammond also announced the operation of higher rates of SDLT for additional properties would be amended to reverse some of the unintended consequences of the previous legislation introduced in 2016. The former chancellor George Osborne introduced higher rates of stamp duty to crack down on the buy-to-let market. He imposed a 3 percentage point surcharge on those buying properties in addition to their main home. While the policy was aimed at landlords, it has had a range of unintended consequences including: those increasing their share of their own home, families affected by a divorce court order and spouses buying property from their spouses.

The government will also close a loophole which meant buyers could give a small portion of their property to their spouse and avoid the SDLT surcharge by arguing they had disposed of a ‘major interest’ in their main residence using the legal definition. Government papers now state that buyers must dispose of the whole of their former main residence to someone who is not their spouse, otherwise the surcharge will still apply.

Vicki Platt