Shared Ownership Stamp Duty Help

Dmoney17

Hi Guys, I am new to the property market im a first time buyer and wanted to get some more information on stamp duty on shared ownership properties. with the new budget things are getting abit confusing for me.

I am looking to purchase a property that is worth £395,000 but I am only looking to purchase a 30% share so, im only purchasing £118,500.

The rent and service charge for the property is also 680 and 120 per month.
the property is also a 125 year lease.

Can someone help me figure out the stamp duty as when I put it in the online calculator on the full market value its £4750. But i was wondering if im only buying a share of the property will it differ?

00ec25

have you read the rules yet?
https://www.gov.uk/guidance/sdlt-shared-ownership-property

You have to choose between:

a) make a one-off payment based on the total market value of the property
or
b) pay any SDLT due in stages

Having made your choice you cannot change at a later date.
If you decide to make a one-off payment up front, this is making a market value election for SDLT.

If you choose to pay SDLT in stages, you pay anything that is due on the first sale amount. But then you don't make any further payments until you own more than an 80% share of the property.


in simple terms you are gambling that if you elect to use option b) by the time you get to buying more than 80% of the property you hope that the SDLT rates and thresholds and the property's value will mean it still costs less in tax than had you made the market value election and paid it all upfront at the start

have you already made that choice given you seem to be working out the market value cost?

if you elect to staircase you would pay £0 now as £118,500 is below the 125k threshold, and only start to pay when you get to 80% or avove. You need to do some sums to compare the possible costs and decide if you are realistically ever going to get to 80% anyway

read the link!

SDLT_Geek

00ec25 makes some good points. Bear in mind also that the £4,750 you have calculated on the £395,000 full value is with the benefit of first time buyers' relief. That relief can be available if you elect to pay on market value. The relief is not available however if you "pay as you go". You would be likely to have a much bigger bill if you staircase to beyond 80%. Are you likely to want to do that? Or to sell to someone who might want to do so?

Lunchbox

With rent of £680 a month it’s likely you’ll also pay SDLT on the rent as well. Our solicitor didn’t include this until we had our final completion statement so we had an extra £2k of SDLT we hadn’t accounted for.

SDLT_Geek

Good point Lunchbox. Rent of £680 per month is £8,160 per year which for a 125 year lease has a net present value of £229,979. SDLT on that would be £1,049, but only if OP elects to "pay as you go" rather than make a market value election.


Another reason for making the market value election and banking the first time buyers' relief!

Lunchbox

SDLT_Geek wrote: »

Good point Lunchbox. Rent of £680 per month is £8,160 per year which for a 125 year lease has a net present value of £229,979. SDLT on that would be £1,049, but only if OP elects to "pay as you go" rather than make a market value election.


Another reason for making the market value election and banking the first time buyers' relief!

When I spoke to HMRC they seemed to suggest that if you then staircase, the SDLT on the rent would be treated as a ‘linked transaction’ and the portion paid on the rent taken into consideration against the final bill, do you know if that’s correct? They didn’t really seem to know much about it, and I was even more confused after trying to read their website!

SDLT_Geek

Lunchbox wrote: »

When I spoke to HMRC they seemed to suggest that if you then staircase, the SDLT on the rent would be treated as a ‘linked transaction’ and the portion paid on the rent taken into consideration against the final bill, do you know if that’s correct?

I do not believe that is right. If one goes for the "pay SDLT as you staircase" method then for a lease granted after 12 March 2008, later transactions do not cause more SDLT to be due on the original grant of the lease, there is no linking that way.

If and when one staircases to over 80% the premium for the grant of the lease will be relevant to the SDLT due on the payment for the staircasing (there is linking in that direction). But the NPV of the rents under the lease will not be relevant to the calculation of SDLT on staircasing. Nor is any credit given for tax already paid against tax calculated to be due on the later transaction.