The Budget Announcement - Stamp Duty 2010
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Labour MPs cheered as Alistair Darling, the Chancellor, announced his plan to inject some optimism into the housing market in 2010 by doubling the stamp duty threshold for first-time buyers. Here we answer your questions about the finer details.
What is the new threshold?
Any property up to and including £250,000 will now be exempt from stamp duty. Before the Budget announcement first-time buyers had to pay 1 per cent of the purchase price of properties worth between £125,000 and £250,000 to HM Revenue & Customs (HMRC).
Is the stamp duty on houses under £250,000 to be scrapped for good?
Does everyone buying a house get the relief?
No, first-time buyers only. The Government defines a first-time buyer as an individual who has “not, either alone or with others, previously acquired a major interest in land which includes residential property situated anywhere in the world”.
Which properties qualify?
Any house, flat, bungalow or bolt hole that is deemed “wholly residential”; so no commercial or mixed-use properties.
I am buying a property through a shared-ownership scheme, do I qualify?
Yes, as long as the property is worth no more than £250,000.
What if I am buying my first holiday home, or a second property?
You will continue to pay 1 per cent on any second property worth more than £125,000, but less than £250,000.
My parents are buying me my first home; does that make me a first-time buyer?
The Government says no. Only those who intend to live in the property and who are named on the title deed are entitled to the relief. If, however, your parents give you the money and you buy the home in your own name, you will qualify.
I want to rent out the house I’m buying; will I still be exempt?
Buy-to-let investors — even if buying their first property — will not receive the relief. As above, HMRC insists that relief is available only to those who are buying the property to live in themselves “as their only and main residence”.
My boyfriend and I are buying a house together. I’m a first-time buyer, but he’s not. Do we benefit?
No, all parties must be first-time buyers.
I previously bought a house with my partner but we have broken up and I am going to buy another property. Am I a first-time buyer?
No. HMRC says: “Where the individual has previously acquired an interest in a residential property as a joint tenant or a tenant in common, the individual is not a first- time buyer.”
If I have inherited a house in the past, but I am actually buying my own house for the first time, surely I am still considered a first-time buyer?
No, again. Acquiring an inherited property or piece of land gives you a “major interest” in a residential property.
I pass the test, I’m a first-time buyer and am completing on a house tomorrow. Do I get the relief?
Yes, the relief applies to all transactions completed after midnight on March 25.
I completed on my house purchase on March 24. Can I claim the relief retrospectively?
Sadly, you just missed out. Only properties under £250,000 bought on, or after, March 25, 2010, and before March 25, 2012, will not have to pay stamp duty.
How do I claim the relief?
Buyers need to enter “relief code 28” at box nine of the land transaction return form.
What’s the age limit?
There isn’t one.
How many people will benefit?
The Council of Mortgage Lenders estimates that about 136,000 first-time buyers will benefit from the relief each year.
Hang on, I’m a first-time buyer trying to buy a £1.5 million flat in Knightsbridge. Will I have to pay more?
Yes, even though this is your first property. The Chancellor said that to pay for the suspension of stamp duty on properties under £250,000, he is raising the stamp duty rate on properties worth more than £1 million from 4 per cent to 5 per cent.
Is this an immediate rise?
No, the one percentage point increase will take place on April 6, 2011.
But it’s only for two years, right?
No, this is a permanent measure.
How much more will I have to pay?
At least £10,000 extra tax per transaction. The total tax bill on that £1.5 million Knightsbridge flat will be £75,000 from April 2011.
I hope you have enjoyed this brief guide and look out for next months mortgage talk on buying property for your children and the various mortgages available.
The team at Avenue & Co Private Finance
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