First-time buyer’s relief

The rules concerning first-time buyer’s relief (FTBR) are changing. Until 31 March 2025, FTBR applies to the first £425,000 when buying a residential property for £625,000 or less. This results in the first £425,000 of the price not being subject to Stamp Duty Land Tax (SDLT), with the remaining amount up to £625,000 being subject to SDLT at a rate of 5%.

However, the thresholds are reducing. From 1 April 2025, FTBR will apply only to the first £300,000 when buying residential property for £500,000 or less. This will result in the first £300,000 of the price being free of SDLT, with the remaining amount up to £500,000 being subject to SDLT at 5%.

To qualify for FTBR there are some core conditions:

• The freehold or leasehold of a single dwelling must be acquired.
• The consideration paid for that dwelling must not exceed £625,000 (or £500,000 from 1 April 2025).
• The buyer must be an individual who has never purchased or otherwise acquired an interest in a freehold or leasehold dwelling anywhere in the world, whether that interest was acquired alone or with others. Previous receipts of gifts or inheritances of land can therefore disqualify buyers from FTBR.
• There are further conditions relating to linked transaction for which specialist advice should be sought. For example, relief can be withdrawn if a linked transaction follows the first acquisition and it disqualifies the first transaction from FTBR, for example by increasing the aggregate consideration beyond the £625,000 (or £500,000 from 1 April 2025) limit.

Below, there are three case studies that show the applicability of FTBR in various and differing situations. The below examples are taken to be a case studies and the application of FTBR is dependent on the facts of each matter.

Case study one

Daisy is a UK resident and is currently renting a residential property in which she lives, she is purchasing her first property which she intends to be her main residence. The purchase price on the property is £400,000. The SDLT will be calculated as follows:

0% on the first £300,000

5% on the remaining £100,000 amounting to £5,000.

Total SDLT payable is £5,000

Case study two

Simon and Amanda are married and are both UK residents, currently living together in a rented property. They are jointly purchasing a property for £425,000, which they intend to be their main residence. Amanda already owns a property which they rent out. As one of the joint purchasers already owns a property, FTBR will not be available.  Additionally, as the parties are married, they are treated as a single unit for SDLT and the higher residential rates of SDLT are likely to apply as Amanda already owns a property – please see this article for further information regarding the higher rates of SDLT.

Case study three

James is a UK resident who has recently inherited an interest in a 50% freehold interest in a residential dwelling. James is currently in the process of purchasing his first dwelling for £250,000 and intends to occupy this property as his main residence. Unfortunately, first-time buyer’s relief does not apply as James is not regarded as a ‘first-time buyer’ as, due to his inheritance, he has a major interest in a dwelling (i.e., the inherited property) and therefore the relief is no longer applicable.