Nearly 70,000 first-time buyers save thousands with new stamp duty relief
Stamp duty has rocked the property industry after a new policy introduced in November 2017 changed rates dramatically for first-time buyers. In a recent report, HMRC has disclosed that a total of 69,000 buyers purchasing their first ever property managed to save tons of cash due to the lower rates now in place.
It’s been increasingly difficult for buyers to get a foot on the property ladder amongst rising house prices in hotspot UK areas. This is especially true for young singletons and couples who have been saving for years to afford mortgages to cover extortionate property costs.
However, there has been a change for the better as buyers welcome the new relief. Average savings have been recorded at around £2,300 because of the changes to stamp duty regulations for first-time buyers. Make sure you qualify as a first-time buyer before getting excited about the new rates. You must have never owned a property before and the property you’re buying should be your main residence. If you want to use it as a holiday home for example, you will not be eligible for the newer rates which are 0% on some property purchase prices.
First-timers in the property market will pay no stamp duty at all on properties under £300,000. The average house price in the UK is currently £218,255, so prospects look good for most new buyers. In fact, 54,600 of the 69,000 first-time buyers bought homes under the £300,000 threshold. In comparison to this, returning property buyers only pay nothing up to £125,000, and have to start paying stamp duty tax on portions of the property price after this amount.
In addition to this, there is now a discounted rate in place for first-time buyers who are buying properties between £300,000 and £500,000. According to HM Revenue & Customs in relation to first-time buyers, ‘Where the purchase price is over £300,000 but does not exceed £500,000 they will pay 5% on the amount above £300,000’.
14,400 people who bought their first houses priced between these amounts benefited from the massive savings. With the old rates, they would have been paying much more. To put it in perspective, a house costing £400,00 for a first-time buyer would be subject to £10,000 in stamp duty tax using the old rates. Whereas, it is now only eligible for half of the amount with the new and reduced 5% rate in action.
After £500,000, first-time buyers can’t claim any relief on the tax. They must pay the standard rates of stamp duty which are currently 5% on property up to £925,000 and 10% on properties up to £1.5 million. For big spenders purchasing their first residence for over this amount, 12% stamp duty will be required for payment.
In total, a huge £159 million has been saved with higher property priced areas of the UK seeing the biggest relief on stamp duty. You can use a sophisticated stamp duty calculator available at RWinvest to work out just exactly how much of the tax you’ll pay in line with the recent changes.
It’s important to consider that there could be even more changes in the future, so check the latest rates before buying your first home.