This question gets asked very often, and while the definition is quite simple, there are nuances that causes confusion. What is a First Time Buyer? The most concise definition is that it is a person who has never directly owned property before.
However, there are subtleties and clarifications required to the First Time Buyer definition. We go through some of the common exceptions, as well as scenarios, that look into the grey areas of what is a First Time Buyer.
First Time Buyer definition for Stamp Duty Land Tax
HMRC has a very simple official one-page document that outlines the criteria to claim First Time Buyer status for Stamp Duty Land Tax relief.
The definition of what is a First Time Buyer is:
“In order to count as a first time buyer, a purchaser must not, either alone or with others, have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world.”
Now, you might think that the phrase “major interest” means property ownership where you have a more than 50% share. However, the legal interpretation of “major interest” is any equity share of a property, whether freehold or leasehold, no matter how small the share.
However, if you have owned property indirectly – for example through a limited company or shares in a corporation – you could still be a First Time Buyer. Owning shares in REITs that own residential property is OK too, as well as owning units in a property investment fund; you are still a First Time Buyer by definition. As long as your interest in the property did not entitle you to occupy or possess the land, you should still be a First Time Buyer.
There is an exemption to the above First Time Buyer definition if the property had a lease of 21 years or less. Why 21 years? It might have to do with the fact that properties with leases less than 21 years count as “short leases”, rather than “long leases”.
While not stated in the guide above, you would be interested to find out that houseboats are not considered a previous residential property! As the definition includes only residential dwellings that have a “legal interest in land”, and houseboats do not.
While the definition above does not explicitly mention this, only properties that have a residential component qualifies. If you have previously only owned non-residential properties, like commercial units or industrial buildings, or empty land, then you are still considered a First Time Buyer. However, if you have owned mixed-used property – like a “shophouse” building, or a farm with residential dwellings on the land – then unfortunately you are not a First Time Buyer.
Many First Time Buyers get caught out with property ownership through inheritance. You lose your First Time Buyer status if you have inherited residential property in the past, even if you have only inherited a tiny amount, never lived in the property, and even if the property was sold very soon after inheriting it. While you might think you qualify for FTB status as you have never “bought” property before, the FTB definition is worded to exclude those that have “owned” property in the past, regardless of how they got their ownership, whether through inheritance of purchase!
So as you can see – what is a First Time Buyer – sounds like a simple question but in fact has many nuances and exceptions to qualify as one.
First Time Buyer definition for Lifetime ISA
The definition of a First Time Buyer is largely the same as that for Stamp Duty Land Tax relief, to make it simpler to understand. However, there are a few more criteria to First Time Buyer Status for a Lifetime ISA.
The official list of criteria is in the First Time Buyer Declaration, which you will need to fill in if you are claiming the Lifetime ISA bonus for your house purchase. Therefore, it is worth reading it now, even before you open a Lifetime ISA, to be aware of the rules.
There are some additional criteria, such as being resident in the UK for tax purposes, as well as only buying property that is suitable for residential purposes.
While the declaration document references the Help To Buy ISA, it is also applicable to the Lifetime ISA, in terms of answering the question what is a First Time Buyer.
Note that if you are buying a property with others in a mixed group of First Time Buyers and non-First Time Buyers, you personally will still qualify for the Lifetime ISA bonus. For example if your spouse has owned property before, but you have not, you can still get the Lifetime ISA bonus on your equity contribution, but your spouse would be ineligible to get any bonus if they contribute equity from their Lifetime ISA.
First Time Buyer definition for Help To Buy Equity Loan
The official documentation for the Help To Buy Equity Loan Scheme Extension (2021-2023) does not go into much detail on the First Time Buyer definition. In the Homebuyers Guide to Help To Buy, page 10 has the very short definition of what a First Time Buyer is:
“Not own a home or residential land now or in the past in the UK or abroad. Not have had any form of sharia mortgage finance”
The first part of the definition is very similar to the definitions for Stamp Duty Land Tax and Lifetime ISA. I would assume that the interpretation, nuances, and exceptions would be the same. However, the second part is an interesting criteria – although I assume the majority of those that have had a sharia mortgage would have had it on a residential property, so therefore are not eligible for the First Time Buyer definition.
Common Frequently Asked Questions (FAQ)
We often get questions around “What is a First Time Buyer?” and “Am I a First Time Buyer?”. Below are some of the frequently asked ones we receive, to help shed some light and clarity on First Time Buyer status.
How do they know if I am a First-Time Buyer?
The government depends on you to make a declaration of your First Time Buyer status during your house buying process. Your conveyancer will provide you a form to fill in. Therefore, the government presumes you are not a First Time Buyer by default – until you tell them so.
While we do not believe the government actively investigates every First Time Buyer declaration to make sure it is truthful, we will never recommend lying to get access to the First Time Buyer benefits. This is because it is easy for HMRC to find any previous ownership of property in the UK, given that it is all centrally recorded at the Land Registry. For overseas properties, while HMRC does not have direct access to other countries’ databases, they do have working agreements with many other tax authorities for limited information sharing.
It is tempting to fudge the answer to the question “Am I a First Time Buyer?”. But the First Time Buyer definitions are very clear, and there is no fudge – not if you owned property decades ago, not if you are now divorced, not if the house you used to own has been torn down and rezoned to commercial use!
Am I a First Time Buyer if I own a property abroad?
No, the First Time Buyer definition is very clear that any property owned, whether in the UK or worldwide, disqualifies you from the First Time Buyer status when it comes to the Stamp Duty Land Tax relief. Even if you own a partial share of a property, as is often the case when it comes to inherited properties, you will need to declare this when purchasing and therefore lose your first time buyer relief from stamp duty.
However, the way the property is owned could mean you still qualify. For example if the property was held in a limited company or a corporate structure where you are a shareholder, or if it is not a typical direct ownership of a property like in an REIT or property investment fund.
Generally, if you think you have had ownership and access rights to a property, anywhere in the world, any time after you have turned 18, the answer is obvious to the question “Am I a First Time Buyer?”.
Can you lie about being a First Time Buyer?
You could lie, and you might get away with it. After all, your only effort required is to sign the First Time Buyer Declaration form. The onus is on the government to find record of you owning another property, to challenge your First Time Buyer status.
However, we strongly advise against lying about being a First Time Buyer. It is a serious tax evasion offence, and you could risk seizure of your home and other assets, along with a permanent criminal record. The Land Registry keeps very detailed and meticulous records on property and land ownership in the UK, so it would be easy for the government to find out you were lying to the question “Am I a First Time Buyer?”
Even for overseas properties, whilst the government does not have easy access to those records, they do have information sharing agreements with certain countries. In addition, all it takes is a leak or a whistleblower to report it, and you can be in serious trouble.
How many times can I be a First Time Home buyer?
Only once. There is a reason why the phrase First Time Buyer has the word “first” in it! The scope of whether you have owned another property or not includes your entire life – not just the last 5 years, 10 years, or 15 years.
There are no exceptions for marital status – if you owned a property jointly with a spouse before, you are still no longer a First Time Buyer even if you are now separated, divorced, or widowed and now single again!
In addition, you do not even need to have “bought” property before to qualify – if you have inherited property, or gained a share of a property through marriage, then the answer to “Am I A First Time Buyer?” is still no.
As you can see, “What Is A First Time Buyer?” is very black and white – if you have ever owned residential property before, anywhere in the world, anytime in your lifetime, you do not qualify for First Time Buyer status.
How does HMRC know if you are a First Time Buyer?
HMRC does not have a database of who or not is a First Time Buyer – they automatically assume you are not one when you purchase a house, until you declare your status to them during the house buying process. Your conveyancer will get you to fill in a First Time Buyer declaration form.
HRMC has access to Land Registry records, as well as Stamp Duty Land Tax records, bank account statements, credit score reports, and many more financial documents about you. Therefore, if they investigate your claim, it will be easy for them to find out whether you have had any interest in a residential property or residential land before.
Can I be a First Time Buyer if I owned a property before?
No, you can not be a First Time Buyer if you have owned a residential property before. However, if it was a non-residential property, say a shop, industrial unit, commercial units, or empty land, you are exempt.
All types of residential properties are counted – even shared ownership properties, or properties where you had a minor equity share.
Inherited properties are also counted, despite many First Time Buyers thinking that they do not. You do not need to have “bought” a property before to be disqualified from being a First Time Buyer.
There are some small exceptions to the rule – see our section above on First Time Buyer Definition.
Who is considered a First Time Buyer?
HMRC have a very succinct definition of a First Time Buyer: “a purchaser must not, either alone or with others, have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world”.
If you have ever owned a property that had some sort of residential use, anywhere in the world, at any time in your life, then you are disqualified from being a First Time Buyer. You really need to have never owned any sort of residential property that you had use or rights to. Even if you have never “bought” a property, but inherited one, that still counts against the official definition above.
The answer to the question “What is a First Time Buyer?” is roughly the same when it comes to Stamp Duty Land Tax, Lifetime ISA, and Help To Buy Equity Loans. However, there are some small nuances, as well as small exceptions to the rule – see our section above on First Time Buyer Definition.
Am I still a First Time Buyer if I have inherited property?
No, if you have inherited property, even if it is a small share, you are unable to qualify for First Time Buyer status, in terms of Stamp Duty Land Tax relief. If you think you are in line to inherit property in the near future, there are actions you can take now to keep your First Time Buyer status intact.
Instead of having the property being inherited, the will of the deceased could instruct for the property to be sold instead, while it is still in the estate, and then the monetary proceeds to be distributed to the beneficiaries. In addition, if the estate contains multiple types of assets, property could be bestowed upon some individuals, and other assets (eg cash) instead bestowed upon those that want to keep their First Time Buyer status.
Many First Time Buyers mistakenly think that just because they have not “bought” a property in the past, the First Time Buyer definition still applies to them. But in reality, the definition is more about ownership than the act of purchase, which catches many people out.
What is a First Time Buyer is a very tricky question, as you can see!