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As of July 8, 2020, those who purchase a residential property will only pay Stamp Duty Land Tax on the amount they pay for the property above £500,000. This holiday will continue until March 31, 2021. Do first-time buyers have to pay Stamp Duty?
What is a first-time buyer?
A first-time buyer is 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”, according to the British Government.
To be considered a first-time buyer, you can’t be a homemover, homeowner, a buy-to-let investor, or remortgaging.
You can’t be a first-time buyer twice, you have to have never owned a property before.
It doesn’t matter if the property you owned was shared ownership or if you owned it jointly with someone else.
The property you are buying as a first-time buyer needs to be your main residence, not a second home.
If you have owned a caravan and lived in it as your main residence, you aren’t a first time buyer!
READ MORE- Inside PM’s new mortgage scheme – What is Generation Buy?
A recent Housing Outlook Report by the Resolution Foundation has found that although house prices are expected to fall as a result of the pandemic, this won’t make it easier for first-time buyers to buy a house.
Only first-time buyers with plenty of money in their savings or wealthy families have benefited financially from this time.
Many first-time buyers have had to put their moving plans to the side or have had to pull out of buying properties during lockdown.
The Stamp Duty Holiday was intended to breathe life into the housing market, but hasn’t done first-time buyers any justice.
Do first time buyers pay stamp duty?
From November 22, 2017, first-time buyers paying £300,000 or less for a residential property have paid no Stamp Duty Land Tax.
However, the new Stamp Duty Holiday on residential properties up to £500,000 applies to everyone including first-time buyers.
This means that at present until March 31, 2021, the new rate is replacing the old rate for first-time buyers.
This means that anyone buying a home more than £500,000 will have to pay Stamp Duty, so takes the advantage away from first-time buyers who probably won’t be spending this much anyway.
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Lenders will now be asking for a larger deposit when buying a home.
To pay for this deposit, the average first-time buyer family of about 30 years old would need to save for more than 20 years to pay for this.
More than half of renters between 25 and 34 don’t have any savings and the pandemic has made saving more difficult due to job losses.
First-time buyers might need to relocate to find work, and commuting or moving costs will be outrageous.
However, Boris Johnson has announced plans for a mortgage plan named Generation Buy.
The plan will encourage people to buy homes and rejuvenate the property market by offering five percent deposits.
The Prime Minister wants the scheme to offer “long-term, fixed-rate” mortgages to let first-time buyers get on the property ladder.
He said this would be a step towards fixing “our broken property market”.
Boris Johnson said he wanted to turn “generation rent” into “generation buy”, and claimed the policy “could create two million more owner-occupiers.”
He added: “We need now to take forward one of the key proposals of our manifesto of 2019: giving young, first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95 percent of the value of the home – vastly reducing the size of the deposit.”
Mr Johnson added: “We believe that this policy – the biggest expansion of homeownership since the 1980s.
“I think a huge, huge number of people feel totally excluded from capitalism, from the idea of homeownership, which is so vital for our society.”
“And we’re going to fix that – ‘Generation Buy’ is what we’re going for.”
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