Last November the government announced major changes to Stamp Duty for first-time buyers.
But almost one year on, research from L&C Mortgages suggests that many aspiring home owners are still in the dark about the changes.
Almost a third of first-time buyers surveyed didn’t know if the if the changes to Stamp Duty would benefit them and nearly 40% claimed they wouldn’t know how much they would save if they bought a home now.
So if you're aiming to take your first step on the property ladder, read on to find out more what the Stamp Duty changes mean for you.
What is Stamp Duty?
Simply put, Stamp Duty is a lump tax which has to be paid if you are purchasing a residential home or piece of land worth more than £125,000 (or £40,000 if purchasing a second home).
It is a banded tax, meaning the value of the home will affect the Stamp Duty you pay.
Stamp Duty is paid regardless of whether you are a cash buyer or taking out a mortgage, but it doesn't apply if you are purchasing a home under £125,000.
Prior to the changes outlined in last year’s Budget, estate agents Savills claimed the average Stamp Duty payment for first-time buyers was £2,700.
Has Stamp Duty been abolished for all first-time buyers?
No, Stamp Duty has only been abolished for first-time buyers purchasing a home worth up to £300,000.
Chancellor Philip Hammond claimed that, as a result of the changes, 80% of people stepping on to the property ladder would not pay any Stamp Duty.
However, those buying a home worth more than £300,000 will still pay the tax, as will those who purchase a home to rent out.
I inherited a property – will I still be considered a first-time buyer?
The legal definition of a first-time buyer is someone who has never previously owned their own home.
So if you inherit a property you would no longer be classed as a first-time buyer and would therefore have to pay Stamp Duty when buying a house for the first time.
I’m a first-time buyer but my partner isn’t. Do we still have to pay Stamp Duty?
If you are jointly buying a home with someone else, both parties will have to be a first-time buyer to qualify for a reduced rate.
However, you can still benefit from the reduction if the mortgage is taken out in the first-time buyer’s name only.
I want to purchase a property worth more than £300,000
If you’re looking to purchase a first home worth up to £500,000 in an area considered to be high value – London, for example – then you won’t have to pay Stamp Duty on the first £300,000 of the price.
So, if you purchase a first home worth £500,000, you will be exempt from Stamp Duty on the first £300,000, and will pay 5% on the remaining £200,000 - a total of £10,000.
I want to purchase a property worth more than £500,000
If you buy a house worth more than £500,000 then you will not benefit from the changes announced last November.
Instead, you will pay Stamp Duty at the same rates as non first-time buyers under the banding system.
This means you will pay nothing on the first £125,000 of the value, 2% on £125,000 to £250,00, 5% on £250,000 to £925,000, 10% on £925,000 to £1.5 million, and 12% on the value above £1.5 million.
To work out exactly how much you would pay, check out our Stamp Duty calculator here.