Monopoly houses and hotels on stacked pound coins to show the change in stamp duty for first time buyers

What the new stamp duty cuts can mean for you

As of the 22nd November, stamp duty will be abolished for the majority of first-time buyers.  This saving will be available in England, Northern Ireland and Wales until the end of March 2018. This is part of the 2017 budget by the chancellor Philip Hammond and aims to help fix the housing market.

Any first-time buyer looking to purchase a property under the cost of £300,000 will be exempt from paying the tax. Additionally, anyone paying up to £500,000 will only have to pay on the purchase over the threshold.

Mr Hammond has stated that 80% of first-time buyers will now pay no stamp duty when purchasing a property.

What is stamp duty?

Stamp duty land tax (SDLT) is a lump-sum tax applicable to anyone buying land or property over a certain price in England, Wales and Northern Ireland.

Under the previous system all home buyers, including first-time buyers, would pay stamp duty up to 12% on properties over £125,000. In the same way, home movers will continue to pay no stamp duty on properties up to £125,00.

The changes do not apply in Scotland which has an independent system of land tax. Stamp duty will devolve to Wales from March 2018.

How much can you save?

The below table can help you work out how much you could save as a first-time buyer on a property up to £300,000:

Property priceStamp duty saving
Up to £125,000£0
£126,000 – £150,000£20 – £500
£151,000 – £200,000£520 – £1,500
£201,000 – £250,000£1,520 – £2,500
£251,000 – £300,000£2,550 – £5,000

Any first-time buyer paying between £300,000 and £500,000 will pay stamp duty at 5% of the purchase price in excess of £300,000. Those purchasing a property over the cost of £500,000 will not receive any relief. However, as the typical first-time buyer pays around £208,000* the average saving will be roughly £1,660.

How Clever Mortgages can help

At Clever Mortgages, we have experience helping first-time buyers from all types of situations get on the property ladder. We work with a long list of lenders to help you find the right mortgage to go with your new home.

*Source: The Guardian, 2017

Small stacks of money on a desk with a red house, pen, bank statement and calculator

Stamp duty on a second home

From April 2016, the government put in place a stamp duty surcharge of 3% on any second home. This applies to any additional house you purchase other than the one you live in. This also includes any second property under the £125,000 threshold that were previously exempt from stamp duty on second home purchases. Because of this, lower price houses were popular for investors as buy to let properties. The additional stamp duty charges were introduced to help first time buyers get easier access to the affordable housing market.

If you’re looking to buy a second home, whether this is to use yourself, or as a buy to let or holiday let then you should make sure you’re aware of the additional stamp duty charges you could face.

What is stamp duty?

Stamp duty land tax (SDLT) is a lump-sum tax that anyone buying land or a property has to pay. In Scotland, they have a slightly different policy known as Land and Buildings Transaction Tax.

How much stamp duty will I pay?

The amount of stamp duty you will need to pay depends on the purchase price of the property you’re buying. The higher the cost of the property, the more stamp duty you will need to pay. However, you will only pay the proportion of the purchase price that is above the threshold.

The extra 3% stamp duty is applied to all house prices on top of the banding structure already in place.

Purchase priceRate on first propertyRate on additional properties
Up to £125,0000%3%
£125,000.01 – £250,0002%5%
£250,000.01 – £925,0005%8%
£925,000.01 – £1,500,00010%13%

The Money Saving Experts stamp duty calculator can help you to work out how much you will need to pay in stamp duty.

Moving house

If you’re moving house then you won’t have to pay the higher rates, but you will need to sell your main home on the same day as you buy your new home. If you sell your main home later on then you will need to pay the higher rate as you will essentially own two homes. You can claim a refund if you sell your old home within 3 years of buying your new home.

A teddy bear in a box after moving house

The cost of moving house

Although your mortgage is likely your biggest expense when buying a house, there are other costs that you’ll need to consider. Some of these you might not be aware of, so we’ve provided a list of the additional costs to expect. This will help to avoid any nasty surprises down the line and allow you to budget for these charges.

1. Mortgage fees

On top of the interest you pay, there are also mortgage fees you’ll need to make to your lender. This is the cost for securing and setting up your mortgage, known as a booking and arrangement fee. Before taking out a mortgage you should look at these fees and make sure you can afford them.

Booking fee

A booking fee – also known as an application or reservation fee – is a charge to your lender made to secure your mortgage deal. This charge is non-refundable and you’ll need to pay it upfront when you’ve made your application.

The cost of this is likely to be between £100-£200.

Arrangement fee

The biggest mortgage fee you will have to pay is the arrangement fee. This is the cost of the lender setting up your mortgage. You will usually be given the option to pay this amount in full or to add it onto your mortgage.

This cost can vary but on average, this is somewhere in the region of £1,000-£2,000.

2. Valuation fee

A mortgage valuation is a requirement of the lender to allow them to check whether the property is safe to lend on. They will want to make sure that if you default on the mortgage, they will be able to repossess the property in order to get back any money lost.

On average, valuations cost around £300 – £400 and you will be expected to pay this upfront.

3. Survey fee

A survey is a more thorough version of the valuation and can help you to confirm that the property’s condition is as you expect. Although surveys are optional, they are strongly advised. This is because if you choose not to get a survey and it turns out that there is something wrong with the property, then you won’t have any protection.

You will usually have a survey done when mortgage offer is in place but before the exchange of contracts. It can sometimes be worth asking your lender how much it will cost to upgrade the valuation to a full survey, in theory making the process cheaper.

You will be looking to pay around £400-£700 for a survey depending which type you choose.

4. Legal fees

You will need a solicitor or licensed conveyor to carry out the legal work associated with buying your new home. This is to take care of the conveyancing (the transfer of home ownership) as well as checking paperwork and carrying out legal searches. You can choose your own solicitor but this will need to be agreed on by the lender. These fees will usually need to be paid in instalments through the buying process.

The cost of a solicitor will usually cost in the region of £1,000 – £1,500. However, this could be a lot more depending on the value of your property.

5. Stamp duty

Stamp duty land tax (SDLT) is the tax that you pay to the government for buying a property in the UK which has a value of more than £125,000. The percentage of tax you pay depends on the property value. You will only pay stamp duty on that portion of the purchase price.

Purchase priceStamp duty rate
Up to £125,000Zero
£125,000.01 to £250,0002%
£250,000.01 to £925,0005%
£925,000.01 to £1,500,00010%

Although it’s your responsibility to pay the stamp duty tax, your solicitor will likely organise this payment for you.

6. Land registry fee

The Land Registry charges a fee to register your property in your name. The fee calculator on the Land Registry website can help you to work out exactly how much you will pay for this. Again, your solicitor will usually help to arrange this payment on your behalf.

This fee is dependent on the value of your property but is likely to be somewhere between £200 to £500.