01 Mar 2012

SDLT - Relief to End for First Time Buyers

SDLT - Relief to End for First Time Buyers

In March there will be important changes in the application of Stamp Duty Land Tax.  Jennifer Yeats, trainee solicitor, examines what impact this will have on the residential property market. 

In March there will be important changes in the application of Stamp Duty Land Tax.  Jennifer Yeats, trainee solicitor, examines what impact this will have on the residential property market. 

Stamp Duty Land Tax is a tax payable to HMRC on most purchases of heritable property in the UK where the price paid is above a certain threshold and is a sizeable expense for buyers. 

It is calculated as a percentage of the purchase price excluding any portion of that price allocated against moveable items.  At present the thresholds for Stamp Duty Land Tax are as follows: 

Purchase Price

        SDLT Rate

            SDLT rate for First Time Buyers

Up to £125,000

        0%

            0%

Over £125,000 to £250,000

        1%

            0%

Over £250,000 to £500,000

        3%

            3%

Over £500,000 to £1million

        4%

            4%

Over £1million

        5%

            5%

As an example, a property purchase of £270,000 incurs a charge of £8,100 in SDLT, whereas at a slightly lower  price of  £250,000 the charge is substantially less at £2,500 (zero at the moment  if a first time buyer).  SDLT therefore has a significant impact on the purchasing power of those buyers looking at this price range and these changes need to be addressed very carefully before buying a property. 

Since 25th March 2010 first time buyers have been exempt from paying SDLT if they purchase a property for less than £250,000. It was hoped that this measure would encourage first time buyers to purchase and stimulate some much needed activity in the property market.  In the last quarter of 2011 the Government dealt a major blow by announcing that this exemption was to be withdrawn in March 2012.  Therefore at present a first time buyer purchasing a property at £150,000 does not pay any SDLT, however if a first time buyer completes a purchase any time after 24th March, 2012 they will require to pay £1,500 in SDLT which may not previously have been budgeted for.  Any first time buyers currently considering purchasing their first home at a price above £125,000 better move fast as all purchases must be settled by the 24th March 2102 in order to benefit from this relief.  

At a time when first time buyers need at least a 10% deposit to obtain a mortgage to complete their first purchase, the concern is that this extra cost will deter many from purchasing at all.  This could well reduce the level of activity at a time when the Government should be doing more to stimulate activity in the property market.

Jennifer Yeats, Trainee Solicitor


Please correct the errors below before submitting your request:

Get in touch

Our dedicated client contact team prefer to receive enquiries through our contact form. We'll endeavour to get back to you within 24 hours or during the course of the next working day.

Source of enquiry