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Understanding First-Time Buyer Stamp Duty and Mortgage Costs

Stamp duty is a tax calculated against the value of the home and applies to most purchases over a tax-free amount, but the higher cap applies to stamp duty for first-time buyers across England and Northern Ireland.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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Understanding First-Time Buyer Stamp Duty and Mortgage Costs

The good news, if you’re buying a residential property for the first time, is that first-time buyer stamp duty thresholds mean you won’t pay anything if the home is worth up to £300,000.

There is a different limit for first-time home buyer stamp duty to provide a greater tax exemption and make it more affordable to buy a home for the first time, without paying stamp duty for first-time buyers.

Stamp duty is a tax calculated against the value of the home and applies to most purchases over a tax-free amount, but the higher cap applies to stamp duty for first-time buyers across England and Northern Ireland.

How Can I Calculate First-Time Buyer Stamp Duty?

You will need to know the property value before you can check whether you need to cover the cost of stamp duty as a first-time home buyer. Your tax obligations depend on where you live, whether you qualify as a first-time home buyer, and what the residence is worth.

Do first-time buyers pay stamp duty at all? Yes, the higher threshold means that a first-time home buyer will pay less stamp duty and none if the property is bought for £300,000 or less. However, higher-valued purchases will still be liable for stamp duty regardless of whether you are a first-time home buyer.

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Stamp Duty for First-Time Buyers

The idea is that stamp duty is applied progressively, so you won’t pay a fixed percentage tax on the entire cost of the home. Instead, you pay the appropriate tax rate as a first-time home buyer based on the value.

In England, the rates are:

Proportion of the Property Value

Stamp Duty

£250,000 or below

0%

£250,001 to £925,000

5%

£925,001 to £1.5 million

10%

Above £1.5 million

12%

Stamp duty for first-time buyers differs because your threshold, below which you pay nothing, is £300,000 – that extra £50,000 tax-free allowance is the first-time buyer stamp duty threshold.

Eligibility for First-Time Buyer Stamp Duty

To qualify for the reduced stamp duty for first-time buyers, you must not have owned any residential property before in any country. That includes inherited or gifted homes and all parties on the application.

If you buy a home with a partner, for example, and they have owned a home before, or you have had a rental property, you will be unable to pay the reduced stamp duty for first-time buyers.

Any first-time home buyer in England must pay the applicable stamp duty within two weeks of the completion date. It is important to pay your first-time buyer stamp duty on time to avoid a fine or penalty.

However, in most cases, your solicitor will deal with the stamp duty for first-time buyer clients on your behalf and manage the transaction at the same time as transferring the funds from your mortgage lender.

In any case, it is your responsibility as a first-time home buyer to remit the tax owing, so it’s essential you calculate the amount of stamp duty for first-time buyers you need to pay and clear the obligation within 14 days.

Adding Stamp Duty to Your First-Time Home Buyer Mortgage

Many first-time home buyer applicants want to add the stamp duty to their mortgage – this may be viable if you do not have the funds to otherwise clear the amount owed. That does mean that your first-time buyer stamp duty charge will add to the amount you repay over time on your mortgage.

You should also consult an independent broker to ensure your mortgage is still affordable and compliant with the lender’s terms since you will need to cover the full amount plus your mortgage borrowing.

For example, if you are a first-time home buyer and want to purchase a property worth £350,000, your stamp duty will be £2,500. If you already have a first-time home buyer deposit of £50,000, adding the extra £2,500 to your first-time home buyer mortgage means your LTV rises from 85% to 86%.

A first-time home buyer lender with an LTV cap of 85% might refuse the slightly higher application value simply because it exceeds their lending policies for first-time home buyer applicants.

Other Mortgage Costs a First-Time Home Buyer Should Consider

Alongside first-time buyer stamp duty, you should ensure your calculations include all the additional costs associated with taking out a mortgage as a first-time home buyer.

Factors such as product charges, early exit penalties, application fees, brokers’ commissions, valuations and moving costs will all affect your overall mortgage value and the additional fees you pay as a first-time home buyer.

For more information about first-time buyer stamp duty and other mortgage costs, please contact the Revolution Finance Brokers team at your convenience.

Our experienced consultants work with first-time home buyer applicants across the UK and can recommend the right mortgages and options, whether or not you are liable to pay stamp duty for first-time buyers.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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Frequently Asked
Questions

Potentially, yes – first-time buyer stamp duty has a higher tax-free threshold. You can buy a home for up to £300,000 in England without paying any tax as a first-time home buyer.

To qualify for stamp duty for first-time buyers, you must never have owned a residential property before, anywhere in the world, whether you bought it with a mortgage, inherited a home or acquired a residence through another route.

First-time buyer stamp duty is zero-rated up to £300,000. Properties worth above that incur stamp duty at the usual rates – there is no different percentage calculation basis for first-time buyer stamp duty.

For example, if you purchase a home worth £350,000 as a first-time home buyer, you will pay a 5% stamp duty on the £50,000 proportion worth over the first-time buyer stamp duty threshold.

If you and any partner or co-applicant you wish to buy a home with have never owned a property before, including a buy-to-let residence, you are eligible for the stamp duty for first-time buyers.

Commercial properties do not count, so you can still use the higher first-time buyer stamp duty threshold if you have owned a business premise such as a shop.

Product fees are charged by the lender and relate to the cost of setting up the new contract. First-time home buyer applicants should check the relevant product fees before applying, as these can vary from zero to £2,000.

No, stamp duty for first-time buyers is based on the amount you buy the property for, even if that varies from the official valuation. However, lenders are unlikely to approve a mortgage for a first-time home buyer if the valuation is considerably different from the agreed sale price.

Valuation costs are sometimes included within the lender's product fees, but more often, you need to cover the additional charge for an independent survey to assess the resale value of the property you’d like to purchase as a first-time home buyer.

These two processes are slightly different, and while you can have a survey carried out at the same time as a valuation, it is more common to have a basic valuation carried out by the lender’s appointed valuer to assess the property value.

A survey is more in-depth and looks at the structure and condition of the property to evaluate whether there are issues or problems you should know about before you move forward with your purchase as a first-time home buyer.

Land Registry charges are separate from stamp duty and relate to the cost of registering the change in title deeds and mortgage deeds – they are not the same thing as calculating and paying first-time buyer stamp duty.

Most first-time home buyer applicants will work with an independent broker and a conveyancer, who can advise on the correct calculations, fees and charges involved, including their obligations to pay first-time buyer stamp duty.

Understanding the varied costs and charges is essential for every first-time home buyer since the mortgage and interest rate itself is just one element of your outlay when you buy a property for the first time.

Yes, first-time buyer stamp duty is based on the transaction value, does not vary with different types of property, and is universal across England. For example, if you buy a flat, a detached home, a large apartment or even an estate, your first-time buyer stamp duty will be calculated on the percentages in the table we shared earlier.

It is - there are different first-time buyer stamp duty regimes in each part of the UK, so if you are considering purchasing a home in another region, it is important to contact an independent broker with full knowledge of how stamp duty for first-time buyers works in each respective location.

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

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