First Time Buyer Stamp Duty Explained

Stamp Duty Land Tax, or SDLT, is a tax that buyers may have to pay when purchasing a property. But some reliefs and allowances could apply, such as relief for first-time buyers. But how does this relief work? We will look at some commonly asked questions about first-time buyer stamp duty relief, including how it works, what the thresholds are for first-time buyers, upcoming changes to SDLT relief for first-time buyers, and what happens if someone’s partner has owned a property before but they themselves have not.

Table of Contents

What is Stamp Duty Land Tax?
How Does Stamp Duty Work for a First-Time Buyer?
How Does HMRC Know if I’m a First-Time Buyer?
What If I’m a First-Time Buyer But My Partner Isn’t?
Upcoming Changes to Stamp Duty Land Tax
How New SDLT Rules in 2025 Could Affect the Housing Market

What is Stamp Duty Land Tax?

Stamp Duty Land Tax applies to most property sales in England and Northern Ireland (note: Scotland and Wales have their own separate tax systems). SDLT is paid to HMRC as a lump sum when someone buys a property. It is usually paid by their solicitor or conveyancer during the buying process. There are several thresholds that determine how much SDLT someone pays when buying a house that is based on the sale price.

The current SDLT rates are:

Up to £250,000 – 0%

From £250,001 to £925,000 – 5%

From £925,001 to £1.5 million – 10%

£1.5 million or above – 12%

SDLT rates only apply to the amount that is over the threshold, so say if you bought a property for £400,000, you would only pay 5% SDLT on £150,000, i.e. £7,500.

How Does Stamp Duty Work for a First-Time Buyer?

First-time buyers can currently pay 0% SDLT on properties with a sale price of up to £425,000, and pay 5% on properties from £425,001 – £625,000. Properties with a sale price of over £625,000 are not subject to first-time buyer SDLT relief. This is subject to change – see the below section on upcoming changes to SDLT.

How Does HMRC Know if I’m a First-Time Buyer?

The buyer must declare whether or not they are a first-time buyer during the process of buying a property. Their solicitor or conveyancer will ask them to sign a declaration if they are a first-time buyer, which is a legal document. Being untruthful on this form could jeopardise the entire house-buying process so it’s important to be honest.

People who have been listed as an owner or part owner on the title deeds of a residential property before, even if they inherited it and sold it as soon as it came into their possession, are not considered to be first-time buyers, so cannot benefit from the SDLT relief.

Most of the time, buy-to-let landlords will not be eligible for SDLT relief as it will not be their first house.

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What If I’m a First-Time Buyer But My Partner Isn’t?

Unfortunately, if your partner is a first-time buyer but you are not, or vice versa, you cannot claim the first-time buyer SDLT relief when buying a property together. There are some exemptions to this but I would always recommend you make sure by checking with your solicitor that they will apply to your situation.

If your partner is not a first-time buyer but you are, you can claim the first-time buyer exemption on SDLT by taking out a joint borrower sole proprietor mortgage. In this type of mortgage, you, as the first-time buyer are named on the property deeds, but your partner is not. This may make the sale exempt from SDLT but could lead to other problems in the future.

If you are buying a shared ownership property, you only need to pay SDLT on the portion of the property you are buying, so if this falls under the SDLT threshold, you won’t need to pay it.

Upcoming Changes to Stamp Duty Land Tax

Some changes are coming to SDLT and how it is calculated. The new SDLT thresholds from 1st April 2025 are as follows:

Up to £125,000 – 0%

From £125,001 to £250,000 – 2%

From £250,001 to £925,000 – 5%

From £925,001 to £1.5 million – 10%

£1.5 million or above – 12%

As for the first-time buyers SDLT relief, the threshold has dropped from £425,000 to £300,000. So only properties sold for less than £300,000 will be eligible for first-time buyer’s relief. For products with a sale price of £300,001 – £500,000, the SDLT rate will be 5%, charged on the portion of the sale price that goes over the threshold.

How New SDLT Rules in 2025 Could Affect the Housing Market

Property experts have predicted that the changes to SDLT rates will lead to a rush on home buying before the new changes come into effect in April 2025, so this could affect the housing market. The minimum house price for SDLT exemption is reduced by half, so a lot more buyers will have to pay SDLT than before, especially as the average house price in England is £285,000 as of December 2023. So essentially, most property sales will be subject to SDLT from April 2025, albeit at a lower rate of 2%.

Areas where the average house price is higher will be more significantly affected by this, such as London and the South East, where house prices often exceed the £300,000 threshold for first-time buyers. Other areas could be affected in the same way if their average house price is over £300,000.

As always, keeping up to date with the latest in tax legislation and other laws relating to UK property is ideal for property investors who want to maximise the potential of their property portfolio and make smart investment choices.

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