What Is a First-Time Buyer?

The general definition of a first-time buyer is someone who has never owned property or an interest in a property anywhere in the world. 

Now, while this is technically true, it’s important to note that some mortgage lenders may be more flexible in their criteria regarding who they class as a first-time buyer, compared to an official authority such as HMRC.  

What does this mean? It means that even if you aren’t technically a first-time buyer and therefore can’t declare yourself so, some mortgage lenders with more relaxed criteria may still give you access to certain first-time buyer mortgage deals in certain situations – such as if you haven’t owned a property for the past 5 years.

Stamp Duty – officially known as Stamp Duty Land Tax (SDLT) – is a tax that must be paid if you purchase property or land in England or Northern Ireland that is above a certain price. This price is currently £125,000. 

If you’re a first-time buyer, you don’t have to pay Stamp Duty for properties valued up to £300,000. If the price of your property is higher than that, you pay 5% on the portion between £300,000 and £500,000. If the property costs more than £500,000, there’s no Stamp Duty relief. Being classified as a first-time buyer therefore can make a significant difference to your costs when buying a home. Read more about Stamp Duty for First-Time Buyers.  

HMRC, the UK tax authority, sets out who it qualifies as a first-time buyer in a guide published in 2017 as follows: “A first-time buyer is defined as 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.” 

It’s worth reading this definition carefully, given how much might be at stake. An “interest” here is defined as any direct equity stake in a property – freehold or leasehold – even if the equity held is small. On the other hand, if you’ve owned property indirectly, such as through a limited company or through a real estate investment fund, this does not count, and you can still consider yourself a first-time buyer eligible for the Stamp Duty exemption. The key issue is whether any property ownership entitled you to occupy or possess the land. 

One exception mentioned in the HMRC document is in the case where someone has previously owned a property with a lease of 21 years or less. This is considered by the tax authority to be a short lease and not relevant. You can therefore re-enter the housing market as a first-time buyer. 

Houseboats are also not considered property so, if you’re looking to buy a house on land for the first time, you’re also a first-time buyer. The same applies if you’ve only owned a commercial property previously, although this does not apply to mixed-use properties that included both a dwelling and commercial space. 

It’s important to note that you won’t be eligible for Stamp Duty relief if you intend to use the property as rental accommodation. Find out more about Stamp Duty in our comprehensive guide. 

You must declare that you’re a first-time buyer during the house purchase process. Your conveyancer or solicitor will ask you to complete a first time buyer declaration form. The presumption is that you’re not a first-time buyer until you state that you are on this form. 

HMRC can access Land Registry and SLDT databases. They also can demand and access your bank account records and credit reports. If they do decide to investigate, it’s safe to assume that they’ll find out if you’ve previously owned or had an interest in a residential property or residential land. 

Furthermore, thanks to the HMRC’s information-sharing arrangements with overseas tax authorities, it’s also unlikely that you could hide ownership of overseas properties either. 

Finally, even if you previously owned a house decades ago, if you’re now divorced from the person you bought a home with, or even if the house you bought no longer exists, it’s just not a risk worth taking.

Typically, you cannot be a first-time buyer more than once in the conventional sense. There’s no statute of limitations on when you previously owned a property, so even if the last time you owned property was 30 years ago, you cannot really consider yourself to be a first-time buyer again. This means you won’t qualify for the first-time buyer Stamp Duty exemption. The same applies if you previously owned a house with your marriage partner and you’re now divorced, or if your spouse has passed away. 

However, some lenders may allow you to benefit from first-time buyer mortgage rates or incentives after a period of not owning a property (such as 3 or 5 years) or you’re purchasing a property with someone who is not a first-time buyer.