First-Time Buyer Guide to Stamp Duty on New Homes
There used to be exemptions from stamp duty for some first-time buyers depending on the value of the property, but this is no longer the case.
While the application of stamp duty applies to all first-time buyer residential property purchases, you may not have to pay anything. This is because the rate you pay depends on where you are in the UK (as Scotland has different rates) and how much the property is worth.
How to Calculate Stamp Duty
Stamp duty is a tiered tax where you pay progressively more as the value of your home goes through pre-set thresholds:
• You pay nothing on the value of your home up to £125,000
• 2 percent of the value from £125,001 to £250,000
• 5 percent of the value from £250,001 to £925,000
• 10 percent of the value from £925,001 to £1.5 million
• 12 percent of the value over £1.5 million
• You buy a property for £120,000 so you don't pay any stamp duty as the whole value of the property is less than £125,000.
• You buy a property for £170,000. You don't pay anything on the first £125,000 but you pay two percent on the remaining £45,000, i.e. £170,000 minus £125,000. The stamp duty you must pay is £900.
You buy a property for £270,000. Three of the stamp duty thresholds apply to this property:
• £0 to £125,000 - no stamp duty
• £125,001 to £250,000 - two percent of £125,000 which is £2,500
• £250,001 to £270,000 - five percent of £20,000 which is £1,000
The total stamp duty you must pay is, therefore, £0 + £2,500 + £1,000 = £3,500
What About in Scotland?
In Scotland, stamp duty is called the Land and Buildings Transaction Tax and the thresholds are different:
• Zero - up to £145,000
• 2 percent - from £145,001 to £250,000
• 5 percent - from £250,001 to £325,000
• 10 percent - from £325,001 to £750,000
• 12 percent - over £750,000
This means you pay less tax on properties worth up to £325,000 in Scotland than you do anywhere else in the UK, but more on properties worth over £325,000:
• A property worth £270,000 - in Scotland the Land and Buildings Transaction Tax would be £3,100 while elsewhere in the UK the stamp duty would be £3,500
• A property worth £370,000 - in Scotland the Land and Buildings Transaction Tax would be £10,350 while elsewhere in the UK the stamp duty would be £8,500
What About Shared Ownership?
The main difference when paying stamp duty on a shared ownership property compared to a standard property is you have two options for paying. The first is to pay the full amount of stamp duty owed when you buy your initial share. The second option is to only pay stamp duty on your initial share. When you then staircase your share to increase the proportion of the property you own you will pay more stamp duty.
How to Pay Stamp Duty
You have 30 days from the completion of the sale to pay the stamp duty you owe. If you don't you could be liable to a fine and interest payments.
While it is legally your responsibility, in many situations your solicitor will handle stamp duty for you.