Stamp Duty Land Tax
5. Shared ownership property
You may have to pay Stamp Duty Land Tax (SDLT) when you buy a property through a shared ownership scheme run by an approved public body.
- local housing authorities
- housing associations
- housing action trusts
- the Northern Ireland Housing Executive
- the Commission for the New Towns
- development corporations
You can choose to either:
- make a one-off payment based on the market value of the property (‘market value election’)
- pay SDLT in stages
Market value election
Submit a return and pay SDLT at the residential rate. Use the total market value of the property to calculate how much to pay - even if you’re only buying a share.
You don’t pay any more SDLT after this, even if you buy a bigger share in the property later on.
You buy a 50% share of a property with a market value of £140,000.
You have to pay SDLT of £300 (0% on £125,000 and 2% on £15,000).
HM Revenue and Customs (HMRC) has guidance on SDLT if you don’t have the right to the freehold.
Paying in stages
You make your first SDLT payment on the price you pay for the lease (the ‘lease premium’) if it’s above the SDLT threshold. If the lease premium is below the threshold, you don’t pay SDLT at this point - but you still have to submit a return.
You may have to pay extra SDLT if the total rent over the life the lease (known as the ‘net present value’) is more than £125,000. Work this out on HMRC’s SDLT calculator. You pay SDLT of 1% on the amount over £125,000 - add this to any SDLT you’re paying on the lease premium.
SDLT if you buy more shares
If you buy any more shares in the property, you don’t have to pay any more SDLT or send a return to HMRC until you own more than an 80% share.
Once your share of the property goes over 80% you must send a return and pay SDLT on:
- the transaction that took you over 80%
- any transactions after that
Calculating your SDLT
To work out the SDLT if you buy more shares that take you over 80%:
Work out the SDLT due on the total you’ve paid for the property to date (including any amounts you didn’t pay tax on). For example, if you’ve paid £160,000 in total so far, the total SDLT due is £700.
Divide the amount you’re paying for this share by the total amount you’ve paid for the property to date. For example, if you’re paying £40,000 for this share, divide £40,000 by £160,000 = 0.25.
Multiply the two figures, eg SDLT of £700 multiplied by 0.25 = £175. This is the amount you need to pay in SDLT for this share.
Additional tax if payments are linked
You may have to pay extra SDLT on previous shares if they become ‘linked’ to later shares. Shares only become linked once you own over 80% of the property.
You can read more about paying SDLT when you buy more shares.