Shared Ownership Stamp duty help

Kitchenwizard

Hi,
I’m trying to figure out how much stamp duty we will have to pay for our shared ownership property. I’ve had a look at various sites and think I have an idea but would prefer a second opinion.
We were getting confused due to the changes and not sure if we pay stamp duty on our whole share of £126,000 or just £1000 of it as you pay 0 on the first £125,000..

We have the option to pay it all and at first and then if we staircase we won’t have to worry in the future or we can pay on the premium and rent but will have to pay it when we staircase and will be charged the value of the property at the time.

Thanks in advance for any advice

House figures
Total property price- £225,000
Our share of the property is 56% (£126,000)

00ec25

OK so you at least tried to read up on it

key question... are you (both) first time buyers? yes/no?
if yes... you wont pay any SDLT at all as the whole value is way below the 300k threshold
if no... the answer is choose between :

a) market value election @ 225,000 which will cost £2,000

or

b) staircase method on 1st tranche of 126,000 which will cost £20 but, as you realise, leave you exposed to the rate and value applicable in the future if you staircase more shares at a later date

https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

https://www.gov.uk/guidance/sdlt-shared-ownership-property

NOTE - the above ignores the possible impact of the net present value of the rent you pay on the share you do not own since you have not provided the rent figure needed to calculate it

Kitchenwizard

Thank you for replying,
We are first time buyers but I’ve read online that we miss out on the exemption of not having to pay stamp duty and we will have to pay it. Our monthly rent will be £226.00

SDLT_Geek

Kitchenwizard wrote: »

Thank you for replying,
We are first time buyers but I’ve read online that we miss out on the exemption of not having to pay stamp duty and we will have to pay it. Our monthly rent will be £226.00

What makes you think you will miss out on the first time buyers' relief? It can be available on shared ownership if you make the right SDLT election and the property is worth under £500K. What is the problem?

Kitchenwizard

No problem, it makes sense now as they were the figures I came to.

One last question, choosing option a, if I staircase from 56% to 80% I pay no stamp duty on that until I go over 80% so if I was to staircase from 80% to 100% in the current market value how much stamp duty would I look to pay on the final 20%?

Thank you for your help so far

00ec25

Kitchenwizard wrote: »

Thank you for replying,
We are first time buyers but I’ve read online that we miss out on the exemption of not having to pay stamp duty and we will have to pay it. Our monthly rent will be £226.00

no

the technical explanation (subject to clarifications made to it by the geek) is that the staircase method is what is called a series of "linked transactions" and therefore SDLT applies to each step and the sum of the parts is also considered.

For that reason if you elect to use the staircase method you are not eligible for FTB relief because this rule applies - quote from FTB guide below:
"A linked transaction may mean that relief that was due at the time of a transaction ceases to be due because of the occurrence of the later linked transaction."
https://www.gov.uk/government/publications/stamp-duty-land-tax-relief-for-first-time-buyers-guidance-note

if you make a market value election there is no subsequent transaction to be linked to the first one, because the whole point of the market value election is you consider the whole price of the property at the point you buy any part of it. As such SDLT is assessed against the full market value 225,000 (excl the net present value of your 226 rent) and that is still below the FTB threshold, hence no SDLT

00ec25

Kitchenwizard wrote: »

No problem, it makes sense now as they were the figures I came to.

One last question, choosing option a, if I staircase from 56% to 80% I pay no stamp duty on that until I go over 80% so if I was to staircase from 80% to 100% in the current market value how much stamp duty would I look to pay on the final 20%?

Thank you for your help so far

no you are still not understanding it

if you make a market value election (option a) you never pay SDLT again ever, no matter how many more times you staircase

SDLT_Geek

00ec25 wrote: »

... if you elect to use the staircase method you are not eligible for FTB relief .............
if you make a market value election ............. you consider the whole price of the property at the point you buy any part of it. As such SDLT is assessed against the full market value 225,000 (plus the net present value of your 226 rent) and that is still below the FTB threshold, hence no SDLT

I agree with what 00ec25 says as quoted above apart from the few words in brackets near the end. If on a shared ownership lease one elects to have SDLT assessed against the market value, then one does not get taxed on the net present value of the actual initial rent. It is only if you decide to "pay as you go" on the staircasing method that you would be taxed on the net present value of the initial rent (if over £125K) in addition to the actual initial payment.

So OP, do you now think you can get first time buyers' relief?

Kitchenwizard

I meant to say option b, I know that option a would not cost stamp duty in the future I put the wrong letter,

00ec25

Kitchenwizard wrote: »

I meant to say option b, I know that option a would not cost stamp duty in the future I put the wrong letter,

example 2 in the link I gave you earlier shows the mechanics of the calculation, don't forget to include the additional tax calculation explained in the para below the workings

https://www.gov.uk/guidance/sdlt-shared-ownership-property