Cash clinic: Tax holiday is over but first-time buyers can still make savings

Q My boyfriend and I have bought our first home, for which we get the keys on 30 January. Our property is costing £145,000 so it is no longer exempt from stamp duty. Because our purchase date is after the threshold change, will we need to pay stamp duty?

LC, Edinburgh

A Stamp duty land tax (SDLT) is charged on all land and property transactions in the UK. Different thresholds and rates apply depending on the type and price of properties. In September 2008, the Chancellor temporarily increased the SDLT threshold from 125,000 to 175,000 in the hope that it would stimulate the property market by encouraging first-time buyers into the market.

The concession has been very helpful – an estimated 132,000 house purchases have avoided the tax, according to the Council of Mortgage Lenders. However, last month the Chancellor announced that the SDLT holiday would come to an end on 31 December, meaning that anyone buying a property for 125,000 again has to pay at least 1 per cent in SDLT. Properties priced over 250,000 to 500,000 are liable to 3 per cent SDLT and those above the 500,000 benchmark have a 4 per cent payable tax.

SDLT is payable at the time of settlement of the transaction, rather than at the time the contract is entered into, so concluding missives prior to the end of the temporary increase in the threshold, with settlement in the new year, will have made no difference. Therefore, in your case, you have to pay SDLT to the value of 1,450.

However, there is some hope for you and other first-time buyers looking to purchase a property under the value of 150,000. Disadvantaged Area Relief can reduce the amount of SDLT in disadvantaged areas, defined by postcode. Unavailable during the SDLT holiday, the government has now reintroduced the benefit and large areas of Edinburgh are allegedly "disadvantaged". Much of the Exchange District in the West End, parts of Holyrood, Leith and Wester Hailes fall into this category.

As this relief has not been claimed by solicitors for some time, it can quite easily be forgotten about but for a property between 125,000 and 150,000 in the right area there can be a saving to be had of up to 1,500. Ask your solicitor to find out if the area you are buying in is applicable for this benefit.

• Alastair Shepherd is a partner at HBJ Gateley Wareing.

If you have a question you need answered, write to Jeff Salway, Personal Finance Editor, The Scotsman, 108 Holyrood Road, Edinburgh EH8 8AS or e-mail: [email protected]

• This above is for general purposes only and is not tailored for individual use. It does not constitute legal, financial or investment advice on any particular matter and must not be treated as a substitute for specific advice. No action should be taken in reliance of the information given. The Scotsman Publications Ltd and HBJ Gateley Wareing accept no liability on the basis of this article.