Stamp Duty Land Tax – Good news for first time buyers
First time buyer relief
In order to help first-time buyers get on the property ladder the government announced in the Autumn Budget on 22 November 2017 a lower stamp duty land tax (SDLT) where they and the property they are buying meet the conditions for the new relief.
The relief means that no SDLT is payable on the first £300,000 of the purchase price, and the rate will be 5% between £300,000 and £500,000. The maximum saving is £5,000.
The main conditions for the SDLT relief are that:
- None of the purchasers currently or previously, wholly or partly, owned another dwelling anywhere in the world, even one they have not lived in.
- the purchase price of the property is not greater than £500,000
- Where the property being purchased exceeds £500,000 the normal rates applies to the whole purchase piece and no relief is received.
If you’re planning the purchase of your first home, or are a parent intending to help with the financing, the new stamp duty land tax relief is good news. However, one wrong step and it could be lost.
Some traps to watch out for:
Joint purchase trap: Where a couple are looking to buy their first home together and one of them owns or has owned a dwelling (or a share in one), the new relief won’t be allowed.
Way around. Non tax considerations need to be taken into account. However, where possible the purchase should be made in the name of the buyer who has not owned a dwelling before. This can be difficult where a mortgage is involved as the lender usually requires all those involved in the loan to appear on the property deeds as owners.
The ownership trap: Where parents or other relations or even friends help first-time buyers fund the purchase, it’s not uncommon for them to have equity in the property. The problem is, it will fall foul of the first condition of the relief mentioned above and mean that none of the purchasers will be entitled to it.
Way around. Parents or others assisting first-time buyers should not share in the ownership; they should lend or give them money instead. A formal loan agreement can be drafted without having an equity stake in the property. It’s advisable to ask a solicitor to draft the loan agreement. As mentioned above non tax considerations need to be taken into account.
If you would like to discuss further please contact Shakeel Butt. email@example.com or 0208 545 7624