Stamp Duty Land Tax: relief for first time buyers
Published 22 November 2017
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Who is likely to be affected
Individuals purchasing a residential property for the first time within England, Wales and Northern Ireland.
General description of the measure
From 22 November 2017 first time buyers paying £300,000 or less for a residential property will pay no Stamp Duty Land Tax (SDLT).
First time buyers paying between £300,000 and £500,000 will pay SDLT at 5% on the amount of the purchase price in excess of £300,000, a reduction of £5,000 compared to the amount of SDLT they would have previously paid.
A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence.
First time buyers purchasing property for more than £500,000 will not be entitled to any relief and will pay SDLT at the normal rates.
The relief must be claimed in an SDLT return.
Policy objective
This measure is part of the government’s commitment to support home ownership and first-time buyers. Introducing this relief will reduce the upfront costs for first time buyers.
Background to the measure
This measure was announced at Autumn Budget 2017.
Detailed proposal
Operative date
This measure will have effect for transactions with an effective date (usually the date of completion) on or after 22 November 2017.
This measure does not apply in Scotland. SDLT was devolved to Scotland on 1st April 2015. This measure will apply in Wales until 1 April 2018, when SDLT will be devolved to Wales.
Current law
The main SDLT legislation is at Part 4 of the Finance Act (FA) 2003.
The current standard rates of SDLT for residential property are set out in table A of section 55 of the Act.
Proposed revisions
Legislation will be introduced in Finance Bill 2017-18 to provide relief for first time buyers. For first time buyers a new set of rates will be substituted at Table A of section 55(1B).
The revised rates and thresholds for residential property purchases worth £500,000 or less by first time buyers will be as follows:
| Portion of consideration | Current standard rates | Rate for first time buyers |
|---|---|---|
| Up to £125,000 | 0% | 0% |
| Over £125,000 and up to £250,000 | 2% | 0% |
| Over £250,000 and up to £300,000 | 5% | 0% |
| Over £300,000 and up to £500,000 | 5% | 5% |
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 |
|---|---|---|---|---|---|
| -125 | -560 | -585 | -610 | -640 | -670 |
These figures are set out in Table 2.1 of Autumn Budget 2017 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2017.
Economic impact
This measure is not expected to have any significant macroeconomic impacts.
The costing accounts for a behavioural response whereby the volume of affected transactions is increased due to a change in prices.
Impact on individuals, households and families
The measure will benefit first time buyers of residential properties where the purchase price does not exceed £500,000 saving purchasers up to £5000. Paying no SDLT reduces the upfront cost of buying a home for first time buyers. This measure is expected to lead to a small increase in house prices in the first year after implementation.
This measure is not expected to have an impact on family formation, stability or breakdown.
Equalities impacts
This measure is likely to benefit younger people. This is due to the fact that first time buyers are likely to be younger.
This measure is not expected to have an impact on any of the other legally protected equality groups.
Impact on business including civil society organisations
This measure is expected to have a negligible impact on businesses. Around 40,000 lawyers and conveyancers, who complete SDLT returns on behalf of purchasers, are expected to incur negligible one-off costs to familiarise themselves with the SDLT rules for first time buyers. The process of automatically calculating the amount of SDLT due will not initially be fully integrated into HM Revenue and Customs (HMRC) online systems. Where the first time buyer is being granted a new lease users will need to overwrite the tax due figure on the return. Users can use the calculator on GOV.UK to calculate how much SDLT is due. This is expected to involve negligible additional work. There is no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
HMRC will need to make changes to IT systems and the online calculator on GOV.UK to support this change, at an estimated cost of £210,000.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will also be monitored and assessed through information collected from tax returns.
Further advice
If you have any questions about this change, please contact the HMRC SDLT Helpline on Telephone: 0300 200 3510 (from abroad +44 1726 209 042).