SDLT Shared Ownership with a FTB Partner

xnemesis

Hi all

I've read dozens of threads on here and all the information on government website re: SDLT and SO but can't quite work out what applies to my situation. I'm hoping someone can shed some light or direct me in the right direction.

I bought a 40% share of my flat in London (not sure if London is relevant to SDLT) back in January 2016. At the time, I did not pay an SDLT as naively I thought I would worry about this in future (and was under £125,000 at the time).

My partner has since moved in and we are looking at staircasing up to 100%. My partner is a first time buyer and will be using a HTB ISA - which after much discussion we have confirmed with HMRC that we can do. The flat is now worth a bit more and valued at £320,000. We will buying the remaining 60% share for £192,000 and our total mortgage to £258,000. We are currently trying to figure out finances before we apply for a mortgage i.e. can we afford it or do we need a bit more cash first. I'm wondering how much stamp duty we will have to pay?

I understand that I am not classed as a FTB for stamp duty purposes as I'm staircasing. However, we would be adding my partner to the mortgage and lease who is a FTB and can access his HTB ISA as a deposit. How much stamp duty would we pay?

Thanks in advance for any information. I've got myself all twisted up in SDLT information.

davidmcn

I can't do the shared ownership bit of the calculation, but the FTB relief isn't available to someone buying jointly with a non-FTB.

xnemesis

davidmcn wrote: »

I can't do the shared ownership bit of the calculation, but the FTB relief isn't available to someone buying jointly with a non-FTB.

That’s a shame! And I definitely wouldn’t be classed as FTB? Even though this is the first property I have bought? All seems a bit unfair - especially as the new £300k rules would have meant I wouldn’t have paid if I’d opted for market value.

SDLT_Geek

It will not be possible to work out the amount of SDLT due unless you say what the price was for the initial 40% share. There is definitely no first time buyers' relief available here.


The SDLT might work out very much better if you first staircase to 80% and leave going to 100% until later. Does that work for you?

xnemesis

SDLT_Geek wrote: »

It will not be possible to work out the amount of SDLT due unless you say what the price was for the initial 40% share. There is definitely no first time buyers' relief available here.


The SDLT might work out very much better if you first staircase to 80% and leave going to 100% until later. Does that work for you?

I’m so sorry for the delay in replying. Currently requesting a RICS survey, so haven’t moved much.

The initial share of 40% was purchased for £104,000.

Ideally, we would staircase to 100% in one transaction as there’s additional fees. But I guess I am open to exploring this, then shortly afterwards Staircasing to 100%

00ec25

xnemesis wrote: »

I’m so sorry for the delay in replying. Currently requesting a RICS survey, so haven’t moved much.

The initial share of 40% was purchased for £104,000.

Ideally, we would staircase to 100% in one transaction as there’s additional fees. But I guess I am open to exploring this, then shortly afterwards Staircasing to 100%

so you have to pay SDLT based on the staircase method

as the geek notes, under that rule you do NOT pay SDLT on ANY purchase up to 80% ownership

you only pay SDLT on any transaction that takes you OVER 80%

so, do the maths, and guess the fees based on a 2 step staircase since your end point appears to be to want to own 100%
1. to 80% (not 1 penny more)
2. to 100%

read example 2 as that sets out the calculation including how to apportion each step...
https://www.gov.uk/guidance/sdlt-shared-ownership-property

if helps, and filling in some gaps in your numbers, and (crucially) assuming the value does not further increase between the step to 80 and the step to 100:

2 STEP APPROACH
you bought 40% at 104k so the value at that time was 260k
then staircase to 80% @ value 320k. Purchase an additional 40% so "cost" 128,000
then staircase to 100 @ value 320k, Purchase final 20% so "cost" 64,000

SDLT calculation...
original 40%. amount paid 104,000. Total paid to date 104,000. SDLT due = £0 (below 125k threshold)

next 40%. Amount paid 128,00. Total paid to date 232,000. SDLT due = £0 because ownership is not OVER 80%

final 20%. Amount paid 64,000. Total paid to date 296,000. So: 125k @ 0% +
125k @ 2% = 2,500 + (296 -125 - 125) = 46k @ 5% = 2,300. Total 2.5+2.3= 4,800. Now, apportion it: 4,800 x 64,000/296,000 = £1,037 payable

CONTRAST THAT TO 1 STEP DIRECT TO 100%
original 40%. amount paid 104,000. Total paid to date 104,000. SDLT due = £0 (below 125k threshold)

step to 100%
60% purchased at cost 192,000. Total paid to date 296,000. SDLT due on 296 = as above 4,800. Now apportion it: 4,800 x 192,000/296,000 = £3,113 payable

note carefully, the above is potentially unrealistic since it assumes there is no change in value between the purchase to 80% and the purchase to 100%. You could of course do those 2 steps simultaneously, in which case the value probably won't change, but as you have already identified, you'd have extra legal fees for 2 steps, but unlikely to cost more than the approx £2,000 SDLT saving.

do the maths and decide !!!

SDLT_Geek

00ec25 wrote: »

2 STEP APPROACH
you bought 40% at 104k so the value at that time was 260k

staircase to 80%
value 320k. Purchase an additional 40% so "cost" 128,000

staircase to 100
value 320k, Purchase final 20% so "cost" 64,000

SDLT calculation...
original 40%. amount paid 104,000. Total paid to date 104,000. SDLT due = £0 (below 125k threshold)

next 40%. Amount paid 128,00. Total paid to date 232,000. SDLT due = £0 because ownership is not OVER 80%

final 20%. Amount paid 64,000. Total paid to date 296,000. So: 125k @ 0% +
125k @ 2% = 2,500 + (296 -125 - 125) = 46k @ 5% = 2,300. Total 2.5+2.3= 4,800. Now, apportion it: 4,800 x 64,000/232,000 = £1,324 payable I make the apportionment £4,800 x 64,000/296,000 = £1,038.

CONTRAST THAT TO 1 STEP DIRECT TO 100%
original 40%. amount paid 104,000. Total paid to date 104,000. SDLT due = £0 (below 125k threshold)

step to 100%
60% purchased at cost 192,000. Total paid to date 296,000. SDLT due on 296 = 125@0%, 125@2% = 2,500 and finally 296-250 = 46@5% = 2,300. Now apportion it: 2,300 x 192,000/232,000 = £1,903 payable I make the apportionment £4,800 x 192,000/296,000 = £3,114.

note carefully, the above is potentially unrealistic since it assumes there is no change in value between the purchase to 80% and the purchase to 100%. You could of course do those 2 steps simultaneously, in which case the value probably won't change, but as you have already identified, the extra legal fees for 2 steps may well cost more than the approx £600 SDLT saving. On my figures the SDLT saving by staircasing in steps is a little over £2,000.

do the maths and decide !!!

Thank you 00ec25 for setting it out so fully. I think that the final apportionments on each calculation are not quite right though and I have put in my figures above in purple. They give:

• SDLT of £1,038 if staircasing is done first to 80% and then again to 100% (assuming the property value does not change).
• SDLT of £3,114 if staircasing is done in one step with the whole outstanding 60% being bought in one go.

00ec25, it would be kind if you would say whether you think my figures are right.

00ec25

SDLT_Geek wrote: »

00ec25, it would be kind if you would say whether you think my figures are right.

must write less in future so I keep track of the correct total paid to date 296,000 and what it is based on 4,800

also must remember pact I made with myself not to answer SDLT when the geek does it better

SDLT_Geek

00ec25 wrote: »

also must remember pact I made with myself not to answer SDLT when the geek does it better

Your answers are helpful. I would not have made it my business to understand SDLT on staircasing transactions had it not been for your efforts.

It is always easier to see the one small mistake than to set it all out!