The first-time buyer stamp duty cliff edge

In England and Northern Ireland, first-time buyer stamp duty relief does not taper away. It vanishes. One pound over £500,000 costs £5,000.

The cliff

First-time buyers pay nothing up to £300,000 and 5% between there and £500,000. Above £500,000 the relief is withdrawn entirely and the standard rates apply to the whole purchase price — not just the excess.

At exactly £500,000 you pay £10,000. At £500,001 you pay £15,000. The extra pound on the price costs £5,000 in tax.

The dead zone

There is a band above £500,000 where paying more for a house leaves you worse off in total. Buying at £500,000 costs £510,000 all in. You have to reach roughly £505,000 before the total outlay at the higher price exceeds that — so every offer between £500,001 and about £505,000 is worse than simply offering the limit.

If you are negotiating in that range, £500,000 is a genuinely rational maximum, and it is worth saying so explicitly to the agent. Sellers do not always realise the buyer's cost curve has a step in it.

Ways to stay under

• Buy fixtures and fittings separately. Carpets, curtains, white goods and furniture can legitimately be bought outside the property price. The amounts must be genuine and reasonable — HMRC challenges inflated apportionments, and your solicitor will advise on what is defensible.
• Negotiate to the limit. A seller may prefer a certain £500,000 to a buyer who cannot complete at £510,000.
• Reconsider whether relief is worth chasing. Above roughly £525,000 the relief was only ever worth £5,000, which may matter less than the right house.

Who counts as a first-time buyer

You must never have owned a dwelling anywhere in the world. That includes:

• An inherited property or share of one, even if you never lived there.
• A property owned abroad.
• A property you were named on in a divorce settlement.
• A property held through a trust where you were a beneficiary.

And every buyer must qualify. If you buy with a partner who has owned before, the relief is lost for the whole transaction — and if they still own that property, the 5% additional property surcharge may apply on top.

Scotland and Wales do it differently

Scotland has first-time buyer relief with no upper price limit. It raises the nil-rate band from £145,000 to £175,000, saving a maximum of £600, but there is no cliff to fall off at any price. LBTT calculator.

Wales has no first-time buyer relief at all — but its £225,000 nil-rate band is the highest in the UK, so most Welsh first-time buyers pay nothing regardless. LTT calculator.