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First-time buyer stamp duty cut: but beware if you’re using a Help to Buy ISA

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Written by: Paloma Kubiak
22/11/2017
The Chancellor has today unveiled a vote-winning Budget for first-time buyers as he announced stamp duty will be cut for properties up to £300,000. But if you’ve a Help to Buy ISA, don’t get carried away.

From today, stamp duty for first-time buyers for properties up to £300,000, or the first £300,000 for properties worth up to £500,000, will be cut.

This move is expected to cut stamp duty for 95% of all first-time buyers while for 80%, they would pay no stamp duty at all.

As part of Philip Hammond’s first Autumn Budget, he said the measure is expected to help more than a million first-time buyers get onto the housing ladder within the next five years.

This is just one of a number of steps taken by the government to help first-time buyers onto the property ladder amid rising house prices, sky high rents and the rising cost of living fuelled by inflation.

In April this year, the Lifetime ISA (LISA) was launched allowing adults aged 18 to 39 to save up to £4,000 a year where they’ll receive a government bonus of 25% – £1,000 on top. The money can be used to buy your first home worth up to £450,000 nationwide or for retirement, as long as the account holder has held the LISA for at least 12 months.

In December 2015, the government’s flagship Help to Buy ISA scheme launched, available for first-time buyers aged 16 or over, allowing them to save £200 per month (an extra £1,000 in the first month can be deposited) where the government will top it up with a 25% bonus, capped at £3,000.

But if you’ve a Help to Buy ISA and you’re excited about the stamp duty cut, there is a word of caution.

The Help to Buy ISA bonus is only available against the cost of buying a property worth up to £450,000 in London or £250,000 elsewhere.

If you fall into the ‘buying elsewhere’ camp, then be aware that even though the stamp duty cut is available for first-time buyers of properties worth up to £300,000, you will only get the government bonus when buying a property up to £250,000, not a penny more.

If you’re tempted (and able) to buy a property costing between £250,001 and £300,000 and you have a Help to Buy ISA, you won’t get the government bonus, but you will still get the stamp duty cut. Legal professionals should make this clear, but bear this in mind when doing your calculations.

Therefore it may be worth considering transferring your Help to Buy ISA to a Lifetime ISA if you think you are in the market to buy a pricier property (£250,001+) outside London.

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