Policy paper

Stamp Duty Land Tax: First Time Buyers' Relief - extension of relief to all purchasers of qualifying shared ownership property 2018

Published 29 October 2018

Who is likely to be affected

Individuals purchasing a residential property for the first time in England and Northern Ireland through a qualifying shared ownership scheme.

General description of the measure

The relief for first time buyers will be extended to purchasers of qualifying shared ownership properties who do not elect to pay Stamp Duty Land Tax (SDLT) on the market value of the whole property when they purchase their first share.

The relief will apply retrospectively from 22 November 2017, meaning that a refund of tax will be payable for those who have paid SDLT after the 22 November 2017 in circumstances which now qualify for First Time Buyers’ Relief.

Relief will be applied to the first share purchased, where the market value of the shared ownership property is £500,000 or less.

First time buyers will pay no SDLT where they are paying £300,000 or less for the first share. Those paying between £300,000 and £500,000 for their first share will pay SDLT at 5% on the amount in excess of £300,000, a reduction of up to £5,000 compared to the amount of SDLT they would have previously paid. The relief will also apply to any SDLT due on the rental payments. The relief will not apply to the purchase of any further shares in the property.

First time buyers purchasing a shared ownership property whose market value is more than £500,000 will not be entitled to any relief and will pay SDLT at the normal rates, in line with the treatment for other first time buyers.

The relief must be claimed in an SDLT return, or by amendment where a SDLT return has already been filed.

The amendment window for those who completed their transaction before 29 October 2018 will be extended by a further 12 months until 28 October 2019.

Policy objective

This measure is part of the government’s commitment to support home ownership and first- time buyers.

Background to the measure

This measure was announced at Budget 2018.

Detailed proposal

Operative date

This measure will have effect for transactions with an effective date (usually the date of completion) on or after 22 November 2017.

This measure does not apply in Scotland as SDLT was devolved to Scotland on 1st April 2015, or to transactions in Wales on or after 1st April 2018 when was SDLT was devolved to Wales.

Current law

The main SDLT legislation is at Part 4 of the Finance Act (FA) 2003.

The rules for first time buyers are set out in Schedule 6ZA and those for shared ownership are in Schedule 9 of the Act. The current rules for first time buyers of qualifying shared ownership properties are at paragraph 16 of Schedule 9.

A first time buyer is defined as an individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and who intends to occupy the property as their main residence.

Qualifying shared ownership schemes are provided by approved bodies such as local authorities and housing associations which help people buy a home by allowing them to buy a share of their home and pay rent on the remainder.

Proposed revisions

Legislation will be introduced in Finance Bill 2018-19 to amend Schedule 9 to extend the relief at Schedule 6ZA to first time buyers purchasing a qualifying shared ownership property who when first granted a lease do not elect to pay SDLT on the market value of the property.

The SDLT rates for first time buyers, which are set out in the table at paragraph 4 of Schedule 6ZA, will apply to the premium paid for the first share purchased.

Where relief for first time buyers is claimed on that first share purchase, relief will also apply so that no SDLT will be payable on the rental payments.

These revisions will also apply to shared ownership property purchased by first time buyers through shared ownership trusts.

First time buyers who purchased their property on or after 22 November 2017 but before 29 October 2018 will be given a further 12 months from 29 October 2018 to amend their return and claim the relief.

Summary of impacts

Exchequer impact (£m)

2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022	2022 to 2023	2023 to 2024
negligible	-5	negligible	negligible	negligible	-5

These figures are set out in Table 2.1 of Budget 2018 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2018.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

The measure will each year benefit around 1,700 first time buyers of residential properties purchasing through a qualifying shared ownership scheme where the market value of the property does not exceed £500,000 saving purchasers up to £5,000. Paying no or less SDLT reduces the upfront cost of buying a home for first time buyers.

This measure is not expected to have an impact on family formation, stability or breakdown.

Equalities impacts

This measure is likely to benefit younger people. This is because first time buyers are likely to be younger.

This measure is not expected to have an impact on any of the other protected equality groups.

Impact on business including civil society organisations

This measure is expected to have a negligible impact on businesses. Around 40,000 lawyers and conveyancers, who complete SDLT returns on behalf of purchasers, are expected to incur negligible one-off costs to familiarise themselves with the SDLT rules changes for first time buyers and shared ownership. Where the first time buyer is being granted a new shared ownership lease, users will need to overwrite the tax due figure on the return. Users can use the SDLT calculator to calculate how much SDLT is due. This is expected to involve negligible additional work. There is no impact on civil society organisations.

Operational impact (£m) (HMRC or other)

HMRC will need to make changes to IT systems and the online calculator on GOV.UK to support this change, at an estimated cost of £300,000.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will also be monitored and assessed through information collected from tax returns.

Further advice

If you have any questions about this change, contact the HMRC SDLT Helpline.