Stamp Duty Land Tax: shared ownership property
Find out how much Stamp Duty Land Tax (SDLT) to pay when you buy property through a shared ownership scheme.
Overview
You don’t pay SDLT if you buy a property in:
- Scotland from 1 April 2015 - you pay Land and Buildings Transaction Tax
- Wales from 1 April 2018 - you pay Land Transaction Tax (LTT)
There are different ways of paying SDLT when you buy a property through a shared ownership scheme. An approved qualifying body, for example a housing association, local authority and certain other public sector bodies must operate the scheme.
Approved qualifying body
The different ways to opt to pay SDLT only apply if an approved qualifying body grants you the shared ownership lease. These are:
- local housing authority
- housing association
- housing action trust
- Northern Ireland Housing Executive
- Commission for the New Towns
- development corporations
When you buy a property from a shared ownership scheme, you work out SDLT each time you buy a share of the property. The transactions count as linked transactions for SDLT.
How to work out SDLT
When you buy a share in a property through an approved shared ownership scheme, you may have to pay SDLT. There are 2 ways to pay:
- make a one-off payment based on the total market value of the property
- pay any SDLT due in stages
If you decide to make a one-off payment up front, this is making a ‘market value election’ for SDLT.
If you choose to pay SDLT in stages, you pay anything that’s due on the first sale amount. But then you don’t make any further payments until you own more than an 80% share of the property.
You can choose which option’s best for you, depending on your circumstances.
These examples are for transactions that take place on or after 4 December 2014 and use the rates that apply on or after that date.
Market value election
When you make a market value election, you send a return and make a one-off SDLT payment as if you’d bought a freehold or leasehold property, outright, from the start. The SDLT is based on the market value of the property at the time, this is stated in the lease.
Once you’ve paid any SDLT due, you won’t pay any more on the property sale. This is even if you ‘staircase’ your ownership in several stages (because you buy a bigger share in the property later on).
You must decide if a market value election is your best option. It’s often best to do this when the total market value of the property is no more than the SDLT threshold for paying SDLT.
If the lease gives you the right to have the freehold
If there’s a market value election where the lease lets you have the freehold to the property, then HMRC charge SDLT on the market value of the freehold. This is its value at the time of the first sale, as stated in the lease and usually applies to houses.
Example
The market value of the freehold is £140,000 and you buy a 50% share for £70,000. You pay SDLT on the total market value of £140,000. You pay SDLT at 0% on £125,000 and 2% on £15,000, a total £300 in SDLT.
If the lease doesn’t give you the right to have the freehold
If there’s a market value election and the lease doesn’t let you have the freehold to the property, HMRC charge SDLT on the ‘open market premium’ This is the premium you’d pay at the time of the sale for the largest share of the property that you can have under the terms of the lease.
If you bought the largest share you can, the ‘net present value’ of the rent that you’d pay under the lease also counts. This is based on the total amount of rent that you’d pay over the term of the lease. You’ll only pay tax on the rent when it’s a large amount.
The market value election deadline
Make a market value election when you send in the SDLT return, or make the election up to 12 months after the return deadline (the ‘filing date’) by amending the return.
You can’t cancel a market value election.
The market value election when you buy a further share in the property
If you buy a property under a shared ownership scheme and you make a market value election, you can get a further share of the property but you won’t pay any more SDLT.
If you buy 100% of the property by getting the freehold, you must fill in an SDLT return to tell HMRC, but you won’t pay any more SDLT.
Paying SDLT in stages: first transaction
If you decide to pay any SDLT due in stages, you’ll pay less to begin with. You may have to make further payments if you increase your share of the property later.
First transaction - base SDLT on the amount you pay
At first, HMRC charge SDLT on the premium you paid for the grant of the lease.
Example
The market value of a property is £140,000 and you buy a 50% share for a premium of £70,000 There’s no SDLT to pay on the premium because its value is below the current SDLT threshold of £125,000. You must still tell HMRC about it by filling a return.
If the market value of the property had been £280,000 and you bought a 50% share for a premium of £140,000 you’d pay SDLT on the premium. This is because the value of the premium is above the SDLT threshold. If you were granted the lease on or after 4 December 2014, the amount of SDLT you’d pay in this case would be 0% of £125,000 + 2% of £15,000, totalling £300.
If there’s a high annual rent
If there’s a high annual rent under the terms of the lease, the rent’s net present value counts when you work out how much SDLT to pay at first.
Paying SDLT in stages and buying further shares
If you buy more shares in a property, called ‘staircasing’, until your share reaches more than 80%, you don’t pay any more SDLT or tell HMRC about the transactions in a SDLT return. This is whether or not you paid any SDLT on the first transaction.
Once your share of the property goes over 80%, fill in a return and pay any SDLT due on both:
- the transaction that took you over 80%
- any further transactions
The amount of SDLT due is based on the total amounts you’ve paid for the property so far. This is because the transactions count as linked transactions for SDLT.
This also means that in some cases you pay tax (or more tax) on the first grant of the lease.
This doesn’t include staircasing payments that don’t take your share of the property over 80%. But if the first grant of the lease took place on or after 12 March 2008, this transaction is excluded because it doesn’t count as linked with the rest of the transactions.
Example of SDLT and staircasing
You first buy a 25% share in a property and ‘staircased’ your share to 75%, you won’t pay any SDLT on the staircase transaction no matter how much it was worth. But if you increase your share from 25% to 85% in a single transaction, you pay any SDLT due on the value of that staircase transaction.
Work out the rate of SDLT due on any further transactions to increase your share of the property in the same way.
Examples
Example 1
On 1 March 2008 you spend £80,000 on a 50% share in a property with a total market value of £160,000.
You later buy a further 25% share in the property for £40,000, taking your share to 75%. On 5 December 2014, you buy the final 25%, including the freehold, for £40,000. You become the outright owner of the property.
The SDLT you pay on the third transaction is £175 - that’s the total consideration of £160,000 at 0% on £125,000 and 2% on £35,000 which is £700 apportioned 1:4.
You’ll also pay £800 on the first lease premium, because this is linked with the later transactions. You fill in a further return under section 81A Finance Act 2003.
SDLT due on the various transactions summary
| Share of the property owned after the latest transaction | Amount paid for the latest transaction | Total amount paid to date - used to work out the rate of SDLT | SDLT payable | Is an SDLT return needed? |
|---|---|---|---|---|
| 50% | £80,000 | £80,000 | zero | yes |
| 75% | £40,000 | £120,000 | zero | no |
| 100% including getting the freehold | £40,000 | £160,000 | £175 | yes |
Additional tax calculation
Tax on the £80,000 lease premium is due at the time of the third transaction. This is because the transactions are linked for SDLT. The total consideration for all the linked transactions is now more than the 0% SDLT threshold. This tax is calculated under the rules which applied at the date the lease was granted, so the tax due is 1% of £80,000 = £800.
Example 2
On 1 March 2012 you spend £75,000 on a 25% share in a property. It has a market value of £300,000.
On 5 December 2014, you increase your share in the property to 85% at a cost of £180,000. Sometime later you pay £30,000 for a further 10% share, and later still, £15,000 for the final 5% share.
The SDLT you’ll pay on the second transaction is £1,941 (total consideration of £255,000 at 0% on £125,000, 2% on £125,000 and 5% on £5,000 = £2,750, apportioned 180:255).
The SDLT you’ll pay on the third transaction is £447 (total consideration of £285,000 at 0% on £125,000, 2% on £125,000 and 5% on £35,000 = £4,250, apportioned 30:285).
You’ll pay a further £743 on the second transaction and HMRC need another return under section 81A Finance Act 2003. There’s no further tax to pay on the first transaction as this doesn’t count as a linked transaction.
The SDLT you’ll pay on the fourth transaction £250 (total consideration of £300,000 at 0% on £125,000, 2% on £125,000 and 5% on £50,000 = £5,000, apportioned 15:300).
You’ll pay a further £316 on the second transaction and £53 on the third transaction. Send further returns under the rules set out in section 81A FA 2003. There’s no further tax to pay on the first transaction as this doesn’t count as a linked transaction.
SDLT due on the various transactions summary
| Share of the property owned after the latest transaction | Amount paid for the latest transaction | Total amount paid to date - used to work out the rate of SDLT | SDLT payable | Is an SDLT return needed? |
|---|---|---|---|---|
| 25% | £75,000 | £75,000 | zero | yes |
| 85% | £180,000 | £255,000 | £1,941 | yes |
| 95% | £30,000 | £285,000 | £447 | yes |
| 100% including getting the freehold | £15,000 | £300,000 | £250 (plus additional tax for transactions 2 and 3, £743 + £316 + £53 = £1,112) | yes |
Additional tax calculation
£180,000 (transaction 2) ÷ £285,000 (total paid transaction 3) x £4,250 (tax due on total consideration) = £2,684.
Tax due on transaction 2 = £2,684.
Tax paid to date on transaction 2 = £1,941.
Additional tax to pay on transaction 2 = £743.
Example 3
You first spend £60,000 on a 50% share in a property with a market value of £120,000 and make a market value election.
Later, you increase your share in the property to 60% at a cost of £12,000.
Later you pay £12,000 for a further 10% share, and later still £24,000 to increase your share to 90%. Finally, you pay a £12,000 to buy the final 10% share.
SDLT due on the various transactions summary
| Share of the property owned after the latest transaction | Amount paid for the latest transaction | Total amount paid to date - used to work out the rate of SDLT | SDLT payable | Is an SDLT return needed? |
|---|---|---|---|---|
| 50% | £60,000 | £60,000 | zero | yes |
| 60% | £12,000 | n/a | zero | no |
| 70% | £12,000 | n/a | zero | no |
| 90% | £24,000 | n/a | zero | no |
| 100% including getting the freehold | £12,000 | n/a | zero | yes |
Rent to HomeBuy schemes
If a first time buyer rents a property while they save up for a deposit, they may be able to use a ‘Rent to HomeBuy’ scheme. Under the scheme, you rent a property under an assured shorthold tenancy until you’ve saved enough money for a deposit and can afford to take on a shared ownership lease.
HMRC charge SDLT only on the shared ownership lease when it’s granted.You can choose to pay either in stages or as a one-off payment.
Fill in the SDLT return
Fill in the SDLT return online, or fill in the paper SDLT return.
Read detailed guidance on how to complete a return for staircase transactions.
Shared equity schemes
These schemes let you buy a property with the help of an equity loan, which you repay when the property’s sold. Examples are First Buy and the First Time Buyers Initiative. The buyer usually buys 100% of the property using a combination of the equity loan and their own funds, for example a personal mortgage. You work out SDLT on the total sale, including the loan. You fill in a SDLT return and pay in the usual way.
Updates to this page
Published 13 March 2013Last updated 8 March 2021 + show all updates
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Purchase deadlines extended for reduced rates for Stamp duty Land Tax.
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The government has temporarily increased the nil rate bands of residential Stamp Duty Land Tax from £125,000 to £500,000.
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From 1 April 2018 SDLT will no longer apply in Wales. You'll pay Land Transaction Tax which is dealt with by the Welsh Revenue Authority.
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Update on how much Stamp Duty Land Tax (SDLT) is payable when buying property through a shared ownership scheme.
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First published.