First Homes scheme income limits key workers: what the rules say

The First Homes scheme income limits key workers face are set nationally. A household cannot earn more than £80,000 a year before tax, or £90,000 if the property is in London, according to GOV.UK. The cap is the same for a teacher, a nurse or any other buyer.

This article sets out what the published government and council guidance says. That guidance does not mention builders’ warnings or a revived Help to Buy-style scheme, so this piece does not assess those claims. What it can do is show how the existing cap works and where key workers could fall on the wrong side of it.

What the First Homes income cap says

GOV.UK says a buyer must be 18 or older, be a first-time buyer and be able to get a mortgage for at least half the price of the home. The home must be the buyer’s only or main residence. The income test uses earnings from the previous tax year.

For couples and groups, the test is on joint income. Everyone must be a first-time buyer and everyone must apply together, even if not all of them are getting a mortgage. In the government’s words: “Your joint income is the total of what you all earned in the previous tax year.”

The discount is 30% to 50% off market value. After the discount, the first sale price cannot be higher than £250,000, or £420,000 in Greater London, according to the government’s planning guidance. That guidance says the price cap applies only to the first sale, and the discount is passed on to later buyers through a restriction on the title at HM Land Registry.

Who could face First Home scheme income cap exclusions

Councils may add local eligibility criteria. GOV.UK gives examples: prioritising key workers as the council defines them, people who already live in the area, or those on lower incomes. These local criteria apply only for the first 3 months a property is on sale. Where people buy together, all of them must meet any local income criteria.

The guidance describes key worker status as a local priority. It does not describe it as an exemption from the national income limit. The only exemption it sets out is for armed forces members, some of their families and recent veterans, who do not need to be key workers or local residents. Even then, GOV.UK says they must meet all other criteria.

Housing Secretary Robert Jenrick said when the scheme launched in June 2021 that it would support key workers “from front-line doctors and nurses to delivery drivers and supermarket staff” by giving “many of them the chance to buy a home at a 30% discount”. Who counts as a key worker varies, because councils define the term. An older HMRC manual on a previous key worker programme listed NHS staff, teachers, police officers, prison and probation staff, some local authority social workers and some firefighters.

Local practice also differs, as the table below shows for Hull.

A worked example: a couple on £87,000

This is an illustration, not real pay data. Take two public-sector workers who earn £46,000 and £41,000 before tax, a joint income of £87,000. Outside London that is £7,000 over the £80,000 limit, so they would not qualify. For a London property, the limit is £90,000, so they would be £3,000 under it.

Now the price test. A home with a market value of £340,000 and a 30% discount would sell for £238,000, within the £250,000 cap. The buyers would need a mortgage of at least half of that, £119,000.

A home with a market value of £360,000 would cost £252,000 after a 30% discount, which is £2,000 over the cap outside London. It would only qualify if a higher discount applied, for example 40%, which would bring the price to £216,000. The 30% discount is the minimum, and councils can require 40% or 50% only if they can show local need.

What to do now

Start with income. Add up what every buyer earned before tax in the previous tax year, because that is the figure the scheme uses. If the total is close to the limit, check it carefully before paying for surveys or legal work.

Next, ask the local council or the developer which local criteria apply. Because they only last for the first 3 months of marketing, timing matters for anyone hoping to benefit from key worker priority. Hull’s page says there is no need to register on a waiting list, as developers market the homes directly and guide buyers through the process.

Finally, check the current figures on GOV.UK, so that thresholds are confirmed before you apply.

Your questions answered

Does being a key worker lift the income cap?

The guidance reviewed does not say so. It lets councils prioritise key workers in the first 3 months of a sale, but every buyer must still meet the eligibility criteria, including the income limit.

Do all councils prioritise key workers?

No. Hull City Council has chosen not to include key worker priority and not to set a local income cap. It does give priority to people with a local connection. Councils can set different local criteria, so check with the one covering the development you are interested in.

What does the scheme mean for builders?

The government’s planning guidance says First Homes should account for at least 25% of all affordable housing units that developers deliver through planning obligations. Those obligations are secured by a section 106 agreement. At launch, Keepmoat Homes chief executive Tim Beale said the firm was “delighted” to be involved. The sources reviewed contain no builder warnings about the income cap or about slower house building.