As a first-time buyer looking to purchase my first property, I was pleased by the Chancellor’s decision to increase the stamp duty threshold to £250k for first-time purchasers. However, I am buying with my partner who has previously purchased a property. Will I qualify for the exemption?
I am all in favour of the decision to exempt first-time buyers from stamp duty for purchases under £250k. The Chancellor could have gone further as there is much merit to exempting all purchasers up to the £250k level.
Despite recent house price falls, many first-timers will now benefit from a saving of up to £2,500.
However, there is much conjecture and speculation about the definition of a first-time buyer and who will or will not be eligible.
We should also bear in mind that this exemption is only due to last until March 2012, although it may be reversed or extended, depending on the next Government.
To answer the question, it does seem likely that you will not be eligible for the exemption because of your partner’s previous property purchase.
HM Revenue & Customs is defining a first-time buyer as someone who has never bought a property either in the UK or anywhere in the world – having said that, I anticipate that checking for the latter will be particularly difficult for HMRC and there is a potential loophole here.
Given your partner has purchased previously, they are likely to have filled out a stamp duty land tax form which is what the HMRC will be checking to determine who is a first-timer and who is not.
Because both purchasers need to be defined as first-time buyers, together you will not be eligible for the exemption and subsequent saving.
There are some other issues to be aware of here which you might have thought would qualify you but actually won’t. For instance, if your partner’s previous property was a buy-to-let investment rather than a residential home – even if they never actually lived in it – they will still not be classed as a first-timer. If your partner inherited a property, then they will not be classed as a first-time buyer.
The bottom line is that, given the information we have for you, unfortunately, you do not qualify for the exemption and will have to pay the standard rate of 1 per cent for properties purchased above £125,000.
Be warned that if you try to cheat your way through the system and claim exemption, there is the possibility you will get caught. The penalties for being found out could be a fine up to £5,000 in England and Wales, £10,000 in Scotland or even a prison sentence of six months.
There is one alternative to ensure you access the saving and that is for you to purchase the property yourself without your partner.
As you will be classed as an eligible first-timer you will be entitled to the exemption but (and this is a rather big but), this depends on you being able to afford the mortgage repayments by yourself and not apply on a joint basis.
Unless it is possibly financially for you to go it alone, this option will no be available to you.
Interestingly, at the time of writing, the information regarding stamp duty rates and thresholds has not been updated on the HMRC site – so if you are checking there for information, be aware that it is still showing pre-Budget information.
Michael White is chief executive of Email Mortgages