How Does Stamp Duty Relief Work for First-Time Buyers?

Buying your first home is exciting, but it can also be expensive. So, it’s good to be prepared for the different costs ahead of time.

One of the biggest costs you’ll face when buying a home in England is Stamp Duty Land Tax. But here’s some welcome news: as a first-time buyer, you could save thousands of pounds through stamp duty relief.

At Setfords, our residential property team guides first-time buyers through property purchases every day. Here’s what you need to know about the stamp duty discount available to you and whether you qualify.

What is Stamp Duty Land Tax?

Stamp Duty Land Tax (SDLT, or just stamp duty) is a tax you pay when buying property or land in England or Northern Ireland. The amount depends on the property’s price and works on a tiered system, similar to income tax.

Your conveyancing solicitor handles the logistics of the payment on your behalf, typically within 14 days of completion.

Who qualifies as a first-time buyer for stamp duty purposes?

According to HMRC guidance, you’re a first-time buyer if you’ve never owned a property anywhere in the world. This definition is strict.

This includes properties you’ve owned in the UK or overseas, inherited from family members, or owned a share in. Any previous ownership counts, no matter how small your share or how long ago.

If you’re buying with someone else, you both need to be first-time buyers to qualify for relief. For example, if you’re buying with a partner who’s previously owned property, you won’t be eligible, even if this is your first purchase.

How much can you save on stamp duty as a first time buyer?

According to current GOV.UK rates, for first-time buyers purchasing properties up to £500,000, you pay:

• 0% on the first £300,000
• 5% on the portion between £300,001 and £500,000
• If the property is worth more than £500,000, you’re not eligible for first time buyer stamp duty relief and will need to pay stamp duty at the regular rate.

Example 1: Buying at £250,000. With relief, you pay nothing. Without it, you’d pay £2500.

Example 2: Buying at £500,000. You pay 5% on the home’s value above £300,000. That’s £10,000. Without relief, you’d pay £15,000 – saving £5000.

Example 3: Buying at £650,000. You won’t qualify for any relief. The property exceeds £500,000, so you’ll pay standard rates totalling £22,500.

In most cases, these aren’t small savings. For many people, this relief makes the difference between buying now or saving for another year.

What about buy-to-let or investment properties?

You can’t claim first-time buyer relief on investment properties. The relief only applies if you’re buying a home to live in as your main residence.

Buy-to-let properties and second homes typically attract an additional 5% surcharge on top of standard stamp duty rates. This applies even if it’s the first property you’ve ever bought.

How does stamp duty work for shared ownership properties?

If you’re buying a shared ownership property, you can choose to either pay stamp duty for the full market value of the property at the time of purchase, or pay it in stages as you purchase larger shares (called staircasing).

First time buyer stamp duty relief applies to shared ownership properties, as long as you meet the criteria and the market value of the property isn’t over £500,000.

You can find out more about stamp duty on shared ownership properties on the gov.uk website.

What you can expect with Setfords

• More time, more attention: With no targets, Setfords lawyers can dedicate more time to you.
• Ultimate flexibility: Our lawyers can tailor their schedules to meet your needs.
• Nationwide coverage: with hundreds of consultant lawyers across the UK, we’ll connect you with the right expert.
• Dedicated specialist legal partner: work directly with your chosen lawyer from start to finish.
• Highly experienced: Setfords lawyers have an average of 20 years’ experience, so you can be assured you’re in safe hands.
• Capacity-based allocation: our lawyers never take on more work than they can handle, so you get the focus and attention you deserve.

Get a conveyancing quote

What about joint purchases with non-first-time buyers?

This trips up many couples. If you’re buying jointly with someone who’s owned property before, neither of you can claim the relief.

HMRC treats joint purchases as a single transaction. All buyers must meet the first-time buyer criteria to qualify for stamp duty relief.

Do I need to apply for the stamp duty relief?

No. Your conveyancing solicitor handles this automatically when they complete your SDLT return (although as the buyer, you do have ultimate legal responsibility for ensuring it is paid)

To claim the relief, you’ll need to sign a declaration confirming you’ve never owned property before. Be completely honest. Incorrectly claiming relief can result in penalties from HMRC including the tax owed, interest, and fines of up to 100% of the tax in serious cases.

When do I pay stamp duty?

Stamp duty becomes payable on completion day, when you legally become the property owner. It must be paid within 14 days. Your solicitor collects the money from you before completion and includes it in their final statement alongside legal fees, search fees, and other disbursements.

Make sure you have sufficient funds for your deposit, stamp duty (if applicable for your property), solicitor’s fees, search costs, and any mortgage arrangement fees. For more on typical costs, click here to read our guide on solicitors’ fees for buying a house.

Common first time buyer stamp duty mistakes to avoid

Don’t assume you qualify without checking carefully:

• “I owned property before, but it was years ago and abroad so it shouldn’t count.” This means you don’t qualify as a first time buyer. Ownership anywhere in the world disqualifies you from first time buyer stamp duty relief.
• “I’ve never bought a property but my parents added me to their deeds.” Unfortuantely, you’re still not considered a first-time buyer. Legal ownership is what matters.
• “I inherited property but signed it over immediately.” You still owned a property, however briefly, so you unfortunately don’t qualify as a first time buyer.

If you’re uncertain about eligibility, discuss it with your solicitor before they submit the SDLT return.

Are there other types of stamp duty relief available?

Aside from stamp duty relief for first time buyers, there are some other scenarios where relief is available. For example:

• Building companies buying an individual’s home
• Property left to you in a will
• Property transferred as part of a divorce (or dissolution for civil partnerships)
• Charities buying a property that will be used for charitable purposes
• Right to buy properties

Your conveyancing solicitor will identify any additional reliefs you might qualify for, and you can find out more about the different types of stamp duty relief on the gov.uk website.

How does this compare to other UK nations?

Stamp duty only applies in England and Northern Ireland. Scotland has Land and Buildings Transaction Tax (LBTT) and Wales has Land Transaction Tax (LTT) with different thresholds.

Is now the right time to buy as a first time buyer?

That depends on your circumstances. Stamp duty relief helps first-time buyers get on the property ladder, but it’s important to also consider whether you can afford ongoing costs like mortgage payments, insurance, maintenance, and bills.

Think about job security and whether you’re planning to stay in the area long-term. Don’t rush into buying just because relief is available.

How Setfords can support your purchase

Buying your first home involves numerous legal steps. From reviewing contracts and conducting searches to managing completion, there’s significant complexity involved.

Our residential property team has extensive experience guiding first-time buyers through every stage. We explain the legal process clearly, handle all the technical work, and ensure you claim every relief you’re entitled to. We understand that most first-time buyers haven’t dealt with property law before. You’ll have a dedicated solicitor handling your matter who you can contact directly with questions.

Final thoughts

First-time buyer stamp duty relief can save you thousands of pounds. For many buyers, it makes homeownership more achievable.

Remember:

• First time buyer stamp duty relief applies to properties up to £500,000
• You pay nothing on the first £300,000
• You must have never owned property anywhere in the world
• All buyers in a joint purchase must be first-time buyers
• Your solicitor handles the payment for you (though you as the buyer are still legally responsible for ensuring it’s paid on time).

Understanding what you’ll pay before making an offer is essential. With the right professional support, buying your first home can be straightforward rather than stressful.