Back to News & Insights
/ Tax

First-Time Buyers Beware!

Author: Henry Ejdelbaum

Tags: Homeowners, property, Stamp Duty, Tax, tax saving

Most industry insiders will comment on the problematic current state of the housing market in England. Many of the problems have been caused by an explosion in buy to let investments.

The government has attempted to respond to this and increase the accessibility of the housing market, especially to first-time buyers, in various ways. The first action taken was the creation of a “second home stamp duty” whereby a buy to let investor would be charged an extra 3% of stamp duty for a purchase of an additional residential property. In November 2017 the government gave even more help for first time buyers with various reliefs and initiatives. Effectively, if the cost of the property was below £500K the first-time buyer would pay no Stamp Duty on the first £300K of purchase price.

But has this helped? With the cost of property spiralling out of control many potential first time buyers do not earn enough to get a mortgage that will cover the cost of the property and will have to look to the “Bank of Mum and Dad”. In these cases, banks will generally insist on parents jointly buying the property with their children. This causes a couple of issues to arise:

  1. The 3% stamp duty might apply to the parents if this property is in addition to their own.
  2. The first times buyer’s allowance will not apply to the share the parents own.

Are these measures really helping with cooling the housing market? Only time will tell, but with all these extra rules brought in, Stamp Duty and all its various offshoots have certainly become a lot more complicated.

If you need advice on how Stamp Duty and other tax issues might affect your purchase of a property, just contact your local AIMS Accountant. We like tax and we can help.