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SDLT briefing - March 2018

SDLT: First Time Buyers’ Relief – What You Need To Know

At a glance:

  • A first-time buyer is someone who has never purchased a freehold or leasehold interest in a dwelling before.
  • They must also intend to occupy the property as their only or main residence.
  • Residential property anywhere in the world is counted when determining whether someone is a first-time buyer.
  • Where there are joint purchasers, all purchasers must be first-time buyers.
  • If the transaction is caught by the 3% surcharge provisions, the first-time buyers’ relief cannot be claimed.

The Finance Act 2018 received Royal Assent on the 15th March 2018 and so we thought it was a good opportunity to recap on the newly introduced First-Time Buyers Relief.

First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000, and a rate of 5% between £300,000 and £500,000. However, if the property is valued above £500,000, no relief can be claimed.

The development has been widely welcomed as a means of encouraging growth in the property market while helping first time buyers get on the property ladder.

And, although the majority of press coverage has been focused on the 0% threshold for properties below £300,000, the new provisions also provide a significant saving for those first-time buyers purchasing properties up to £500,000. Where the relief is available, an acquisition of a property worth £500,000 will now attract £10,000 of SDLT instead of £15,000.

As always, however, the devil is in the detail, and the finer points of each particular case must be examined in order to determine whether the relief will be available.

The legislation has now been passed which provides a number of conditions which must be satisfied in order to claim the relief.

A common misconception is that the relief will be available for all first-time buyers purchasing properties under £300,000. However, this is not the case. For example, a first-time buyer will not qualify for the relief, if the property is intended to be a buy-to-let or a holiday home. This is because the property must be intended to be occupied as the only or main residence.

Furthermore, relief will not be given if the transaction is caught by the 3% surcharge for additional property purchases. This may seem something of a misnomer: by definition, how can a first-time buyer fall within the additional property purchases provisions?

Well, there are a number of different scenarios which can lead to just such an eventuality. For instance, consider the position where a husband, who is a first-time buyer, wishes to purchase the family’s main residence in his sole name. His wife inherited a property which she currently lets. He is the only purchaser in the transaction and he meets the definition of a first-time buyer. In this situation, relief would be denied. This is because spouses are effectively treated as the same person for the 3% surcharge provisions and, therefore, as the wife owns an additional property, the acquisition of the main residence would attract the higher rate of SDLT.

Accordingly, the only circumstances in which spouses/civil partners can avail of the first-time buyers’ relief, in cases where additional properties are held by one of them, is where there is a disposal of a previous main residence in conjunction with the first-time purchase (which was itself intended to be used as a replacement main residence).

I’ve presented a pretty basic scenario here, but it highlights the potential pitfalls when applying the new provisions; professional advice should always be sought in cases of doubt.

Acting solicitors will be required to enter a code on the stamp duty return indicating that their clients are first-time buyers, and will have to calculate the stamp duty due according to the new rates – and according to each individual case.

We have prepared a flowchart which takes the reader step-by-step through the legislation.

If you have any queries around SDLT please do not hesitate to get in contact via our SDLT Advisory Service.