This guide looks at the different options for paying Stamp Duty Land Tax (SDLT) when someone buys a property through a shared ownership scheme operated by an approved qualifying body such as a housing association, local authority and certain other public sector bodies.
It also provides links to guidance on SDLT for private sector shared equity or shared ownership schemes.
On this page:
The different options for paying SDLT outlined in this guide only apply
if the shared ownership lease is granted by an approved qualifying body.
These are:
Where a property is bought from a shared ownership scheme, SDLT is calculated and charged each time a share of the property is bought and the transactions are treated as 'linked' for SDLT purposes.
Find out more about SDLT for linked transactions
The rest of this guide deals with shared ownership schemes operated by an approved body.
When someone buys a share in a property through an approved shared ownership scheme they may have to pay SDLT. There are two ways to pay:
If the buyer decides to make a one-off payment up front this is known as making a 'market value election' for SDLT.
If the buyer chooses to pay SDLT in stages then they pay anything that's due on the initial purchase amount. But then they don't have to make any further payments until they own more than an 80 per cent share of the property.
Each of the options for paying could suit different buyers, depending on their circumstances. It's up to the buyer to decide. The differences between the two payment options, and how SDLT is calculated in each case, are explained below.
If the buyer decides to make a market value election, they make a one-off SDLT payment in the same way as if they'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 will be stated in the lease).
Once they've paid any SDLT due they won't have to pay any more on the property purchase. It makes no difference if they 'staircase' their ownership by buying a bigger share in the property later on, perhaps in several stages.
It's up to the buyer to decide if making a market value election could be advantageous. It's often most beneficial to do this when the total market value of the property is no more than the threshold for paying SDLT. The threshold is currently £125,000
Check the current SDLT rates and thresholds
If there is a market value election where the lease allows the buyer to acquire the freehold to the property then SDLT is charged on the market value of the freehold. This is its value at the time of the initial purchase, as stated in the lease. This most commonly applies to houses.
For example, if the market value of the freehold is £140,000 and the buyer purchases a 50% share for £70,000, SDLT is due at 1% on the total market value of £140,000. So in this example the buyer pays £1,400 in SDLT.
If there is a market value election and the lease doesn't allow the buyer to acquire the freehold to the property then SDLT is charged on the 'open market premium' - that is, the premium that would be payable at the time of purchase for the maximum share of the property that can be acquired under the terms of the lease.
The 'net present value' of the rent that would be payable under the lease if the maximum share was purchased is also taken into account. This is based on the total amount of rent that would be payable over the term of the lease. In practice, tax will only be due on the rent when it is a significant amount.
You can find out more about when the rent payable is taken into account in our guide on SDLT and leasehold properties.
Find out more about SDLT and leasehold properties
If you want to make a market value election you should do so when you send in the SDLT return. Alternatively you can make the election up to 12 months after the deadline for sending in a return (the 'filing date') by amending the return.
The easiest way to complete an SDLT return is online. Follow the links to find out more.
Find out how to complete an SDLT return
The law doesn't allow a market value election to be cancelled - so once you make a market value election (whether by filing or amending a return) you can't change your mind.
If someone buys a property under a shared ownership scheme and makes a market value election, they can go on to increase their share of the property without having to pay any more SDLT.
If they buy 100 per cent of the property by acquiring the freehold, they must complete an SDLT return to tell HM Revenue & Customs (HMRC). But they still won't have to pay any more SDLT.
If a buyer decides to pay any SDLT due in stages they'll pay less to begin with. But they may have to make further payments if they later increase their share of the property.
SDLT is initially charged on the premium paid for the grant of the lease.
So if, for example, the market value of a property is £140,000 and the buyer purchases a 50% share for a premium of £70,000, there is no SDLT payable on the premium because its value is below the current SDLT threshold of £125,000. But the buyer must still tell HMRC about it by completing a return.
However, if the market value of the property in the above example were £280,000 and the buyer bought a 50% share for a premium of £140,000 they would have to pay SDLT of £1,400 on the premium. This is because the value of the premium is above the threshold at which SDLT becomes payable at 1%.
If there is a significant annual rent payable under the terms of the lease, the rent's 'net present value' is also taken into account when working how much SDLT is initially payable. Read the guide on leasehold transactions below to find out more about the net present value.
Find out more about SDLT and leasehold properties
Check the current SDLT rates and thresholds
If someone buys further shares in a property (called 'staircasing') they don't have to pay any more SDLT or notify HMRC about the transactions in an SDLT return until their share reaches more than 80%. This is the case whether or not they paid any SDLT on the initial transaction.
However, once the buyer's share of the property goes over 80%, they must complete a return and pay any SDLT due on both of the following:
The rate of SDLT applied to these payments is based on the total amount paid for the property so far, including the initial grant of the lease. This is because the transactions are treated as 'linked transactions' for SDLT purposes.
If someone who initially bought a 25% share in a property staircased their share to 75%, they wouldn't have to pay any SDLT on that staircase transaction no matter how much it was worth. But if they had increased their share from 25% to 85% in a single transaction, they would have to pay any SDLT due on the value of that staircase transaction. The rate of SDLT applied to the staircasing payment would be based on the total amount they had paid for the property so far.
The rate of SDLT due on any further transactions to increase their share of the property would be worked out in the same way. See the section below for some practical examples.
Martin Jones initially spends £80,000 on a 50% share in a property with a total market value of £160,000.
He later buys a further 25% share in the property for £40,000, taking his ownership to 75%. Sometime later he buys the final 25%, including the freehold, for £40,000 and becomes the outright owner of the property.
At the time of the transactions, SDLT is payable at 1% on linked transactions in residential property worth in total over £125,000 but no more than £250,000.
The SDLT due on the various transactions is summarised in the table below.
| 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 acquisition of the freehold | £40,000 | £160,000 | 1% of £40,000, which is £400 | Yes |
Sameera Kahn initially spends £75,000 on a 25% share in a property with a market value of £300,000. She later increases her share in the property to 85% at a cost of £180,000. Some time later she pays £30,000 for a further 10% share, and later still she pays £15,000 for the final 5% share.
At the time when Sameera makes each of the transactions, SDLT is payable at 1% on linked transactions in residential property worth in total over £125,000 and up to £250,000 and at 3% on transactions worth over £250,000 but no more than £500,000.
The SDLT due on the various transactions is summarised in the table below.
| 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 | 3% of £180,000, which is £5,400 | Yes |
| 95% | £30,000 | £285,000 | 3% of £30,000, which is £900 | Yes |
| 100% including acquisition of the freehold | £15,000 | £300,000 | 3% of £15,000, which is £450 | Yes |
Mark and Eileen Simpson initially spend £60,000 on a 50% share in a property with a market value of £120,000. They later increase their share in the property to 60% at a cost of £12,000. Some time later they pay £12,000 for a further 10% share, and later still they pay £24,000 to increase their share to 90%. They then pay a further £12,000 to buy the final 10% share.
At the time when they make each of the transactions, SDLT is only payable on transactions worth more than £125,000.
The SDLT position on the various transactions they make is summarised in the table below.
| 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 | £72,000 | Zero | No |
| 70% | £12,000 | £84,000 | Zero | No |
| 90% | £24,000 | £108,000 | Zero | Yes |
| 100% including acquisition of the freehold | £12,000 | £120,000 | Zero | Yes |
If a first time buyer decides to rent a property while they save up for a deposit they may be able to use a 'Rent to HomeBuy' scheme. Under the scheme buyers rent a property under an assured shorthold tenancy until they have saved enough money for a deposit and can afford to take on a shared ownership lease.
SDLT will only be charged on the shared ownership lease when it is granted. Buyers can choose to pay either in stages or as a one off payment, in the same way as anyone taking on any other shared ownership lease. Read the earlier sections in this guide for more information about how to calculate the amount of SDLT to pay.
The quickest and easiest way of completing an SDLT return is online. If you prefer to fill in a paper return (which is more time consuming) you can read about how to do it in our guide to completing a paper SDLT return.
You can read detailed guidance on how to complete a return for staircase transactions by following the link below 'See examples of how to complete a SDLT return'.
See examples of how to complete a SDLT return
Check the benefits of filing an SDLT return online
Find out how to fill in a paper SDLT return
These schemes allow a property to be bought with the aid of an equity loan repayable when the property is sold. Examples are First Buy and the First Time Buyers Initiative. The buyer usually buys 100 percent of the property using a combination of the equity loan and their own funds, For example, for a personal mortgage. SDLT is calculated on the total purchase, including the loan and an SDLT return is completed and payment made in the usual way.
