First-time buyer's stamp duty break explained: how much can I save?

First-time buyers qualify for a reduced rate of stamp duty, with some not having to pay the tax at all.

What is stamp duty?

Stamp duty is the tax you pay the government on any home or land bought in England or Northern Ireland. Scotland and Wales have their own systems.

It's always paid by the buyer, not the seller.

Stamp duty works out as a percentage of the property you’re buying. The more expensive the property, the higher the percentage you’ll pay.

But in good news for buyers, you only pay the given percentage on the part of the property price that sits within each band.

What are the stamp duty rates?

The threshold at which first-time buyers start paying the tax has is £425,000 on homes costing up to £625,000.

The level at which stamp duty kicks in if you're not a first-time buyer is £250,000.

Do first-time buyers pay stamp duty?

No and yes. It all depends on the price of the property you’re buying.

First-time buyers don’t have to pay the tax on the first £425,000 of the home they’re buying.

So if the home costs less than £425,000, you won’t have to pay it at all.

Equally, if the home you want to buy is less than £625,000, you won’t have to pay any stamp duty on the first £425,000, but then you’ll pay 5% stamp duty on the bit between £425,000 and £625,000.

But if first-time buyers want to buy a home that costs more than £625,000, all stamp duty exemption privileges are removed and they have to pay the regular rates just like everybody else.

First-time buyers stamp duty bands

So, unlike regular buyers, who start paying the tax on any property worth more than £250,000, first-time buyers get extra leeway, with the tax not kicking in until the property they want to buy hits the £425,000 mark.

If you bought a property costing £600,000, you would pay:

• 0% on the first £425,000

• 5% on the remaining £175,000 = £8,750

And your bill would be £8,750. 

What are the stamp duty rates if you're not a first-time buyer?

Home movers will not pay any stamp duty on the first £250,000 of a property they're buying.

Home movers stamp duty bands

So, if you bought a property costing £500,000, you would pay:

• 0% on the first £250,000

• 5% on the portion between £250,000 and £500,000 = £12,500

So your bill would be £12,500.

Who is classed as a first time buyer for stamp duty?

The definition of a first-time buyer for the stamp duty exemption is quite strict.

In order to qualify, you can never previously have owned a property or a share in one, either in the UK or abroad. 

Even if you’ve inherited a property, never lived in it and sold it immediately, you would still no longer count as a first-time buyer.

You’ll also need to live in the home you’re planning to buy.

If you’re buying with someone else, they too will have to meet the above criteria, otherwise the regular stamp duty rates will apply to the purchase.

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When do you have to pay stamp duty?

Stamp duty must be paid within 14 days of the date you complete on your property purchase. That’s when the ownership of it legally transfers to you. 

Usually this part of the process is handled by your solicitor or conveyancer. They’ll send the stamp duty land tax return to HM Revenue & Customs on the day of completion and transfer the money on your behalf.

Here’s more information on how to file stamp duty land tax returns to HMRC

Can I pay stamp duty in installments?

Only if you’re buying a shared ownership property. Otherwise, sadly not. The bill must be paid in full within 14 days of completion. 

How does stamp duty work if I'm buying a Shared Ownership property?

When you buy a share in a property through an approved Shared Ownership scheme, there are two ways to pay to stamp duty:

1. Make a one-off payment based on the total market value of the property

2. Pay any stamp duty due in stages

With the second option, you work out the stamp duty each time you buy a share of the property. The payments count as 'linked transactions' for stamp duty.

If you choose to pay your stamp duty in stages, you'll pay anything that’s due on the first sale amount. But then you don’t make any further payments until you own more than an 80% share of the property.

You can choose which option’s best for you, depending on your circumstances.

Whether you opt to pay the stamp duty upfront or in stages, first-time buyers of Shared Ownership homes worth under £625,000 will be entitled to the full stamp duty relief.

Find out more about paying stamp duty for Shared Ownership properties at the government’s website.

Find out more about Shared Ownership with our guide.

What if I am buying a further share of my first property? 

If you already own part of a shared ownership property, you'll typically no longer be classified as a first-time buyer. 

That means any further shares you want to buy will be subject to standard stamp duty rates.

There are exceptions, which you can read more about in stamp duty expert John Shallcross's article.

Does the stamp duty break apply to leasehold properties?

Yes. The waiver applies to both freehold and leasehold homes, so long as the lease still has at least 21 years or more to run. 

Does stamp duty apply to homes bought in Scotland and Wales?

Yes, but both Scotland and Wales have their own versions of stamp duty.

In Scotland, the tax is called the Land and Buildings Transaction Tax. 

Land and Buildings Transaction Tax rates in Scotland

In Wales, it’s called a Land Transaction Tax.

Land Transaction Tax rates in Wales

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