Last week’s budget had important news for first time house buyers. The Chancellor of the Exchequer, Philip Hammond, told MPs that he had received representations for a stamp duty ‘holiday’ for first-time buyers, and that he would be abolishing stamp duty land tax for first-time buyers purchasing homes up to £300,000. Additionally, first-time buyers wanting to purchase a property up to £500,000 will not pay stamp duty on the first £300,000 and 5% from £300,000-£500,000.
Relief on Stamp Duty
The Treasury estimates that this move will help over one million first-time buyers get onto the housing ladder over the next five years. In the HM Treasury briefing document which was published after the budget, first-time buyers were described as ‘more cash-constrained than other buyers’ and that as a result, stamp duty ‘can represent an upfront cash burden on top of a deposit and conveyancing fees’.
For solicitors, this new measure will require entering a code on the stamp duty return indicating that the client is a first-time buyer and calculating the stamp duty due according to the new rates.
Who is classed as a first time buyer?
According to this legislation, a first-time buyer is defined as someone who has never owned a freehold or leasehold interest in a dwelling before. It also refers only to the purchase of someone’s only or main residence. This includes property abroad, with residential property anywhere in the world being counted when determining whether someone is a first-time buyer.
For those buying a property jointly, all parties must be first-time buyers to be eligible for the new relief.
Will this really help first time buyers?
There is no doubt that change will reduce the upfront cost of buying a house. It will also reduce the pressure of saving for both a deposit and stamp duty payment. However, it is possible that those who will gain the most will be those who are currently in the process of purchasing, and who have already set aside money to pay stamp duty at the standard rates.
It should also be noted that the independent Office for Budget Responsibility suggest that the main effect of this stamp duty cut will be to raise house prices, by 0.3%.
This would would mean that the main gainers from the policy will be people who already own property.
The OBR also suggests that only 3,500 first time buyers will benefit from the measure, and that there is a distinct possibility that the measure could easily be abused by non first time buyers.
When did this come into effect?
The change in stamp duty rules for first time buyers came into effective immediately last week. As a result, they apply to all purchase transactions completed after the 22 November 2017. Purchasers who completed before 22nd November 2017 will not be able to claim refunds.
How do I know if I’m eligible?
The Government published a guidance document on the change to stamp duty for first time buyers, which can be viewed HERE. However, advice should always be sought from an accountant or our property specialists at Harold Stock & Co Solicitors.
We are always happy to continue helping first time buyers with the legal formalities of purchasing their first home, including completing the stamp duty form. For more information about these changes, or if you are thinking about purchasing your first property, talk to us today