SDLT on shared ownership- two step staircasing?

lhua01

First post here. Have been reading relevant posts and want to confirm if my understanding is correct:
Bought a resale shared ownership leasehold flat, 1 year ago at 445K *35%, FTB so no SDLT paid.
would like to staircase to 100% asap now that mortgage LTV limit improved due to changes in personal situation.
If staircase to 100% in one shot: (assuming no value change in the last year)
SDLT due: 12250 *65%=7962.5

If staircase to 80% then 100%
SDLT due: 12250*20%=2450 (do I need to count the first transaction here? obviously I bought after 2008 but it's a resale property and the lease was granted to the first buyer in 2006?)

If no linked transaction is to be considered, two step process will realise a saving of around 5500. Am I correct?

Now as two transactions will also incur transaction costs - not sure if anyone had any experience in minimising the transaction costs during the two step process? e.g. would I be able to obtain a mortgage which allows me to borrow a further ~89K for the second transaction soon after this one (the tracker mortgage products usually have a £999 product fee). What about solicitor fees?

Thanks in advance for your help!

00ec25

no idea what posts you read, but they were not relevant and your figures are wrong

up to 80%, no SDLT
over 80%, pay SDLT, but the calculation is adjusted for "apportionment"

read the rules below and then very carefully read example 2 several times as there is a lot to take in.
You do not have a linked transaction BTW


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

lhua01

Thanks for replying - can you elaborate on why my figures were wrong? I have of course read the guide and came up with these numbers according to it. All calculation was done assuming property price stays at 445k.

SDLT_Geek

Here are my thoughts and calculations.

First you should check the lease to see if your predecessor elected to pay the SDLT on the market value of the property. If that was done then there is no SDLT now on staircasing. That is true even though it is you who have the lease now.

Assuming the election was not made then it looks like this.

First, work out the payments made on linked transactions. You say to assume that, however many steps you now take to go from 35% to 100%, the value of the property should be taken as £445,000. So that makes payments totalling £289,250.

You should check, but it seems the transactions to lift you from 35% to 100% are not linked to either:
(a) The payment your predecessor made to acquire the lease or
(b) The price you paid to take an assignment of the lease.

So if we take £289,250 as the total and assume SDLT at standard rates (you are no longer a first time buyer and I shall assume the higher rates are not due) the SDLT on £289,250 is £4,462.

£4,462 is the SDLT you would pay if you staircase in one go.

If you staircase in stages, getting first to 80% and then from 80% to 100% the calculation is different.

There is no SDLT on getting to 80%.

Assuming you pay £89,000 to go from 80% to 100% the SDLT on that step would be 89,000/289,250 x £4,462 = £1,373.

lhua01

Thanks a lot SDLT Geek. Somehow I always thought that the total SDLT before apportioning was applied on the full value of the property regardless of linked transactions or not. So looks like a 3000 ish savings but after transaction costs maybe not much left if I'd have to remortgage twice.

BushyGround89

Hi Iluha - Can I just check what your progress has been with this and if the SDLT Geek calculations are correct?

I currently own 45% and am looking to staircase to 80% to avoid SDLT and then hoping to sell or buy the remaining amount further down the line. The benefit of saving the tax from 45% to 80% would be incredibly helpful.

Thanks
Luke

WLITC

Interesting post but I am still confused and need to decide myself whether to cough up £1250 now for full market value (using FTB relief) or paying nothing and then payingSDLT later on should I mange to be able to staircase to 100%.
Can someone look at my figures. I am buying a place with a full market value of £325k and I am buying 40% at £130k. Now lets assume I staircase to 80% in a few years at another £130k (assume no increase in value to make it simpler) and then a few years later again I finally staircased to 100% at the cost of another £65k. In this scenario, what do I land up paying in SDLT?

SDLT_Geek

By a fluke of the maths, the SDLT would be the same on your numbers.

On your assumptions you end up paying £325,000 in a series of linked transactions. Only the transaction taking you over 80% is liable to SDLT. The SDLT is worked out as follows.

First calculate the SDLT on the total you assume you will pay of £325,000 (no first time buyers' relief). That is £6,250 if today's rates of SDLT still apply.

Then take the relevant fraction. That is £65,000 / £325,000. That fraction of £6,250 just happens to give SDLT of £1,250.

WLITC

SDLT_Geek wrote: »

By a fluke of the maths, the SDLT would be the same on your numbers.

On your assumptions you end up paying £325,000 in a series of linked transactions. Only the transaction taking you over 80% is liable to SDLT. The SDLT is worked out as follows.

First calculate the SDLT on the total you assume you will pay of £325,000 (no first time buyers' relief). That is £6,250 if today's rates of SDLT still apply.

Then take the relevant fraction. That is £65,000 / £325,000. That fraction of £6,250 just happens to give SDLT of £1,250.

Wow, okay that's great sounds like I might as well take the zero payment now option. So can I just be clear on the formula, its the costs of the transaction that takes you over 80% divided by the total market value £325k, x £6250. If that's the case, do the last two figures change if the house goes up in value by the time I do the last transaction, or are these figures always based on what the full market value was at the time I bought the first share?

SDLT_Geek

The calculations are based on the sums paid. So if values go up it will be on a higher sum. Also the rates of SDLT and the rules might change.