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Stamp duty cut for first time buyers – but who are the real winners?

After weeks of speculation, the Chancellor of the Exchequer Philip Hammond delivered the budget on 22 November. In a highly anticipated move, the Chancellor introduced a relief from Stamp Duty for first time buyers of residential property, which became effective immediately.

The changes mean that first time buyers buying a property for £300,000 or less will pay no Stamp Duty at all, and where the purchase price is between £300,000 and £500,000 first time buyers will only pay 5% Stamp Duty on the amount above £300,000. Where the purchase price is over £500,000 no relief is available and normal Stamp Duty rules apply.

The rules are very strict about who qualifies as a ‘first time buyer’. A buyer wishing to make use of the relief must not (either on their own or jointly with anyone else) have acquired a major interest in a house anywhere in the world. Buyers that have previously inherited property or been given property also cannot take advantage of the relief.

Where property is being purchased jointly, all buyers must be first time buyers and if one of them does not qualify as a first time buyer, then the relief is not available at all. All joint buyers must also intend to use the property as their main residence in order to be able to claim the relief. If only one of the joint buyers intends to live at the property then the relief cannot be claimed and Stamp Duty must be paid at the normal rates.

The relief is claimed through the buyer’s lawyer who will complete the relevant sections in the Stamp Duty tax return.

However, the Office for Budget Responsibility quickly sounded a note of caution. They pointed out that the main winners as a result of the cut may well be people that already own property, as it expects all house prices to increase by 0.3% in the next year as a result of the changes.

Analysts AJ Bell have also indicated that due to the lower house prices in the north of England that the average Stamp Duty paid by first time buyers is just £11.82, so the changes are more likely to favour areas where house prices are significantly higher.

Author: Michael Steele

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