Shared Ownership Stamp Duty cost on properties over 500k

Agee

I am first time buyer and I found 1 bed Shared Ownership property in London worth £540k. I would like to purchase 25% now, which is £135k share. I understand that SDLT relief is only on properties under £500k. What would be my cost of Stamp Duty Tax then as I cannot fathom what happens if property is over £500k?
PS. It is very unlikely that in future I will staircase to more than 35%.
Thank you for your help!

Poppycat68

I take it you are a first time buyer - my calculation would be 35% of the stamp duty - which would be 35% of 16250, or 5687

That said, my first property was shared ownership and on advice I paid the full stamp duty - I could not foresee that I would eventually staircase (which I did) and if I hadn't done it it would have cost me dear.

my understanding you only have a choice of all or the part that is yours.

SDLT_Geek

Agee wrote: »

I am first time buyer and I found 1 bed Shared Ownership property in London worth £540k. I would like to purchase 25% now, which is £135k share. I understand that SDLT relief is only on properties under £500k. What would be my cost of Stamp Duty Tax then as I cannot fathom what happens if property is over £500k?
PS. It is very unlikely that in future I will staircase to more than 35%.
Thank you for your help!

I have some different numbers for you. First time buyers' relief is not available because of the value of the property. You are left with a choice:

(a) Pay SDLT on the £540K market value. That would be £17,000. It would mean that you or anyone else staircasing would not have to pay any more SDLT on the staircasing.

(b) Pay SDLT now on the £135K you pay. That is £200. But it means there could be more SDLT to come on staircasing.

Given that you do not anticipate staircasing to over 35% then option (b) might well be the right one for you.

Let us play "what if". Let's say go for option (b) and pay the £200. But then you come into some money and staircase over a period. What is the likely further SDLT? It all depends and the rules are odd. Let's say you staircase over a period and (on the basis of rising values) you might end up paying a total of £600,000. You only pay SDLT on the transaction that takes you over 80%. Say that transaction involves a payment of £200,000. Your SDLT on that transaction would be worked out like this:

1. Work out the SDLT on the £600K paid at the rates prevailing on the day of the staircasing to over 80%. If they are the same as today's rates that is £20,000.

2. Pay a fraction of the £20,000. The fraction is £200,000 / £600,000. That is 1/3. That gives SDLT due of £6,667.

So in that scenario you did well to go for option (b). But perhaps values will go up higher. Or perhaps SDLT rates will increase.

00ec25

Poppycat68 wrote: »

I take it you are a first time buyer - my calculation would be 35% of the stamp duty - which would be 35% of 16250, or 5687

your calculation would be wrong and should be ignored

read SDLT geek
learn the rules for shared ownership:
https://www.gov.uk/guidance/sdlt-shared-ownership-property
apply the non FTB rates
https://www.gov.uk/stamp-duty-land-tax/residential-property-rates

a) 17,000
or
b) 200

Lunchbox

With an owned proportion of only 25% of a property of that value, it’s very likely you will also have to pay stamp duty on the rent, and it may be quite significant.

jonnygee2

I am first time buyer and I found 1 bed Shared Ownership property in London worth £540k.

Why on earth would you pay that for a one bed?! Where is this place?

I think this is a very bad idea. Once you own it, others won't be able to use help to buy to buy it (because it won't be new) and the market for £0.5m one bed apartments is clearly very limited.

00ec25

Lunchbox wrote: »

With an owned proportion of only 25% of a property of that value, it’s very likely you will also have to pay stamp duty on the rent, and it may be quite significant.

good comment

the net present value of the rent is best done using the HMRC calculator
I have no idea what is a real rent, but say it was £10,000 per year, that would make the SDLT payable
£200 on the £135,000 purchase "premium"
and
£1,512 as a once only payment against the rental element.

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

jonnygee2

I have no idea what is a real rent

Rent is likely to be around £800 / month so your guesstimate of £10,000 is very reasonable.