Stamp duty land tax is the bill that catches first-time buyers off guard. You have scraped together a deposit, only to learn there is a tax on the purchase itself. The good news is that first-time buyers get a meaningful break — but you need to budget for it all the same.
How it works
Stamp duty is charged in bands, a bit like income tax. You pay nothing on the portion of the price below a threshold, then a rising percentage on the portions above. Crucially, you only pay the higher rate on the slice of the price within that band, not on the whole amount — a common misunderstanding.
First-time buyer relief
First-time buyers pay no stamp duty up to a higher threshold than other buyers, and a reduced rate on the portion above it, up to a price cap. Buy below the threshold and you may owe nothing at all. Above the cap, the relief disappears and standard rates apply to the whole purchase.
Things to watch
- To count as a first-time buyer, you generally must never have owned a home anywhere — including inherited or overseas property.
- If you are buying with someone, both usually need to qualify for the relief to apply.
- The thresholds change with government budgets, so check the current figures before you commit.
Budgeting for it
Stamp duty is paid shortly after completion and cannot usually be added to the mortgage, so it must come from savings alongside the deposit, legal fees and survey. Work out the figure early using an online calculator, and fold it into your deposit target from the start rather than discovering it at the end.