The delivery of next week’s Budget by chancellor Rishi Sunak may see changes to how stamp duty works for first time buyers. It is thought there is a possibility that stamp duty may be made lower for those purchasing homes worth £500,000 or more. 

How does stamp duty work for first-time buyers?

Currently, first-time buyers in England and Northern Ireland do not have to pay any stamp duty on the first £300,000 for a property worth up to £500,000. These buyers are then required to pay a 5% stamp duty tax on the portion between £300,000 and £500,000. If the property is worth under £300,000 then no tax is paid at all. These new stamp duty rules have been in force since 2017.

However, not all first-time buyers currently benefit from this tax exemption. This is because the exemption is not in place for those who buy a property in excess of £500,000. These buyers do not receive any stamp duty relief and are required to pay the duty in full.

As of 22 November 2017, first-time buyers who purchase a property under a Shared Ownership scheme can now also claim stamp duty relief on homes that are valued up to £500,000.

Who classifies as a first-time buyer?

A first-time buyer in the UK is someone who has never owned a freehold or had a leasehold interest in an UK or overseas residential property. This will be the first time they have made a purchase on a residential property.

It is important to be aware that if you are married and you are going to buy a property together, both need to meet the stamp duty relief requirements to get the first-time buyer exemption.

What could these potential changes mean for first-time buyers?

If the latest Budget does reveal an increase to the stamp duty exemption threshold, this could be very welcome news for first-time buyers purchasing houses in London and the South East, where house prices are higher.

A Director from GriggsHomes.co.uk commented on this possible change: “Changes to stamp duty will have a huge impact for first-time buyers and those struggling to get on the ladder. From a developer’s perspective, it is very exciting knowing that demand for new builds and properties will be higher and people might have bigger budgets too, especially since stamp duty may be much lower or even abolished for first-timers buying a property under £500,000.”