How Stamp Duty works with Shared Ownership and staircasing
When you buy a property in the UK, one of the costs you have to consider is Stamp Duty Land Tax (SDLT). If you buy a Shared Ownership home, you can pay your Stamp Duty either in full when you buy your initial share or in stages as you staircase. Wondering which option is best for you? Or have other questions about the details of staircasing and Stamp Duty? Read on for all the answers you need…
What is SDLT?
Stamp Duty is a tax you have to pay when you buy a property or land over a certain price in England or Northern Ireland. The threshold for residential properties at the time of writing is £125,000. This rises to £300,000 for first-time buyers purchasing a home worth £500,000 or less.
You have to pay SDLT when you buy a freehold or leasehold property, including when you buy a Shared Ownership property. For a Shared Ownership home, you can choose to pay the Stamp Duty in full when you purchase your initial share. This means the amount you pay will be based on the full market value of your home. This is called ‘market value election’ and is explained in detail here. The other option you can choose when buying through Shared Ownership is to pay SDLT in stages. If you choose this option, any subsequent buyer of your home will have to pay in stages too.
Will I have to pay SDLT when I staircase?
If you used the market value election process to pay Stamp Duty in full when you bought your first share of your home, you will not have to pay any further Stamp Duty when you staircase.
If you chose to pay in stages, you will only have paid SDLT based on the value of the initial share you bought. You will then have to pay Stamp Duty again when you staircase to owning over 80% of your home. Any times that you staircase between your initial purchase and hitting the point of 80% ownership, no SDLT will be due.
Note that if you buy a resale Shared Ownership home from a buyer who opted to pay in stages, you will be committed to paying in stages as well – so you will owe SDLT when you reach 80% ownership.
Where do simultaneous staircasing and sale transactions fit in?
Sometimes, it is possible to staircase your way to full ownership at the same time as selling your home (meaning the buyer purchases 100% of the property). Known as a back-to-back sale, this type of transaction means you should be able to claim SDLT sub-sale relief. This means you shouldn’t have to pay Stamp Duty – but do check this with your solicitor.
How much SDLT will I have to pay when staircasing?
If you pay your SDLT in stages, you will have to make one payment when you purchase your initial share of your property and a second payment when you staircase past 80% ownership. Each of the amounts due will depend on several factors, including the current market value of your home and the current SDLT thresholds set by HMRC.
In relation to Stamp Duty thresholds, it’s important to note that once you’ve purchased the initial share of your home (regardless of the size of that share), HMRC will no longer consider you a first-time buyer. This can impact how much Stamp Duty you have to pay when you reach 80% ownership of your home, because the SDLT thresholds are higher for first-time buyers than for other buyers. A solicitor with Shared Ownership and staircasing expertise can provide further guidance on this.
Understanding staircasing
Remember that SDLT is just one of the costs of staircasing that you’ll need to think about when purchasing additional shares of your property. If you are considering staircasing, you can find more information on the staircasing section of our website.
Please note: Stamp Duty Land Tax guidance is updated regularly by the government. We do our best to keep this information up to date, but it’s always a good idea to check the latest guidance on the gov.uk website.
The SNG team is also here to help with all of your staircasing queries:
Customers in the South and West can reach out by emailing staircasing@sovereign.org.uk or by calling 0300 330 0718.
If you’re in London and Hertfordshire, you can contact us using staircasingsnh@sng.org.uk or by calling 0300 330 0718.