Shared Ownership and Stamp Duty Land Tax (SDLT)

It’s worth getting to grips with Stamp Duty Land Tax (SDLT). You have several options when you buy an initial share in a Shared Ownership home. And the decision you make now will affect how much SDLT you pay if you buy more shares in the future. 

Do I have to pay SDLT on a Shared Ownership home?

It depends…. 

If the total value of your home is below HMRC’s threshold for SDLT then your liability is calculated as £nil, meaning you have nothing to pay. At the moment, if you qualify as a first-time buyer the threshold for SDLT is £425,000. If you don’t qualify as a first-time buyer (for example, if you have ever purchased, or inherited, a residential property) then the threshold is £250,000.

Bear in mind that HMRC update SDLT thresholds on a regular basis. The thresholds were increased in 2017 in order to make buying a home cheaper. However, this was intended to be a temporary measure and the current thresholds only apply up to 31 March 2025. You can check SDLT thresholds on GOV.UK: Stamp Duty Land Tax. And HMRC also provides a handy SDLT calculator.

How is SDLT calculated?

SDLT is calculated based on:

• the date you bought your home,
• how much you paid (the ‘premium’),
• whether or not you qualify as a first-time buyer (or for any other reliefs or exemptions).

But SDLT is more complicated when it comes to shared ownership homes. The SDLT you pay will also take into account whether your home is a new-build or a resale and - in some cases - how much rent you pay to your landlord.

New-builds – the two SDLT options

When you buy your initial share, you have two options:

1. to make a one-off payment, or
2. to pay SDLT in stages.

Option 1 - Paying outright - ‘Market value election’

If you choose this option you make a single upfront payment based on the total market value of your home, as if you had purchased it in full. This is called making a full market value election.

Option 2 - Paying in stages

If you choose this option the SDLT you pay is based on the market value of your initial share, not the whole property. Which makes sense. But, unfortunately, it’s a bit more complicated if you are not a first-time buyer. If you are buying a new-build and do not qualify as a first-time buyer, you may have to pay additional SDLT on the rent you pay your landlord.

How do I choose whether to pay SDLT outright or to pay in stages?

HMRC say: ‘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 payment threshold’. (Link quote).

In other words, if you are a first-time buyer and the total value of your home is less than the first-time buyer threshold of £425,000 it’s a no brainer. Paying outright is your best option as it will cost you nothing.

The decision is more complicated if you do not qualify as a first-time buyer and/or the total value of your home is higher than the threshold. You will have to think about whether you can afford to pay upfront, and whether it is likely to be worthwhile in the context of your future intentions.

Paying outright (full market value election) – pros

• If you are a first-time buyer and the total value of your home is below the HMRC threshold (currently £425,000) you won’t pay any SDLT now, or if you staircase in the future. This is because you have dealt with your SDLT liabilities in advance (calculated as £nil).
• If you pay outright then SDLT won’t be charged on your rent (whether you qualify as a first-time buyer or not).
• If your home is above the HMRC thresholds (£425,000 for first-time buyers and £250,000 if you do not qualify as a first-time buyer) you will pay SDLT now, but will not have to pay any further SDLT if you buy more shares in the future.
• Shared owners do not qualify as first-time buyers after they have purchased their initial share. Even if they are buying more shares in the same property. So making a full market value election allows you to make the most of a higher SDLT threshold for first-time buyers.

Paying outright (full market value election) – cons

• You may not be able to afford upfront payment of SDLT – even if this could potentially cost you less over the long-term than paying in stages.
• If you have no intention of staircasing, then it may not be worth paying more than you need to when you buy your initial share.
• Following purchase of the initial share, shared owners do not pay any more SDLT until they staircase over 80%. If your lease restricts you from staircasing over 80%, there would be no point making a full market value election.

Paying in stages – pros

• Initial cost savings!
• If your total share in the property is never more than 80%, you will not pay any further SDLT.
• You will be liable for SDLT if you staircase over 80%. In that case, SDLT could potentially add up to a lower total amount payable than under the market value election option. (But don’t rely on it! The cost will depend on the market value of your home when you staircase and the SDLT thresholds and rates in force at the time).

Paying in stages – cons

• Strange as it seems, if you are not a first-time buyer you may have to pay SDLT on the rent you pay your landlord. This applies if your home is a new-build and the total rent payable over your lease term (adjusted for future inflation) is above the SDLT threshold (currently £250,000). In this case, you will pay SDLT at 1% on the portion over £250,000. You can find more information on GOV.UK – scroll down to the section The NPV of the rent.
• You will be liable for SDLT if you staircase over 80%. If you do, SDLT could potentially add up to a higher total amount payable than under the market value election option.
• When you staircase you won’t qualify for first-time buyer relief, as you did when you bought your initial share.

Can I make a full market value election on a resale?

No, a market value election can only be made on the sale of a new-build (the grant of a lease) and not on a resale (the assignment of a lease).

Don’t take our word for it!

SDLT is complex. Is your shared ownership scheme operated by an approved qualifying body, or not? Are you buying an initial share with a partner who owns their own property? Are you in the process of divorce or separation? Are you out of the country a lot due to working abroad? These - and other relevant circumstances - could affect how much SDLT you pay. Make sure to get expert professional advice from your financial advisor and solicitor on your own individual situation and plans for your home.