Shared Ownership Stamp Duty
The stamp duty land tax on shared ownership purchases differs from a standard purchase or staircasing stamp duty, as you have 2 different options for paying. We run through both options below, including their pros and cons.
Do you pay stamp duty on a shared ownership property?
When buying a shared ownership property, you can either make a one-off payment on the full value of the property, or pay stamp duty in stages, meaning you pay whatever is due on the first share and then the rest of the stamp duty on staircasing.
What property is exempt from stamp duty?
You could be exempt from paying shared ownership stamp duty if you're a first time buyer purchasing a property worth £300,000 or less. In this case, you're exempt from paying anything on the first £300,000 but are taxed 5% on the portion from £300,001 to £500,000.
Market Value Election
Paying it all in one go is called market value election. This option requires you to pay the full amount of the stamp duty land tax on the full market price of the property, not just the share you are buying.
If you choose to pay the full stamp duty on shared ownership, you then pay £10,000 as a non-first-time buyer or £1,250 with shared ownership first time buyer relief*.
You can see the current stamp duty rates and calculate stamp duty on shared ownership by using our tool below.
Pros
- You don't have to pay any more stamp duty on staircasing later.
- You can apply your first time buyer shared ownership stamp duty relief to the full amount.
- If the property goes up in value, you don't have to pay any more stamp duty when staircasing.
Cons
- The additional cost may be considerable. It's more difficult to afford paying a one-off sum as opposed to paying in stages.
- You could invest the additional cost in buying a bigger share in the property instead of stamp duty (you get to own more of your property, and pay the stamp duty later).
| Property Price | Standard Rate of Stamp Duty | Additional Home Rate (updated post Oct 2024 budget) | Non UK Resident Rate |
| £0 - £125,000 | 0% | 5% | 2% |
| £125,001 - £250,000 | 2% | 5% | 2% |
| £250,001 - £925,000 | 5% | 10% | 2% |
| £925,001 - £1.5 million | 10% | 15% | 2% |
| Over £1.5 million | 12% | 17% | 2% |
Paying in Stages
When paying it stages, you will pay whatever is due on the first transaction and then only pay staircasing stamp duty once you reach 80% shared ownership or over. You will pay stamp duty on the transaction that takes you over 80%. Make sure you don't get caught out in the complexities of the calculation you have to pay if you are buying a new lease (new build).
You normally pay stamp duty on that first share. However, the shared ownership stamp duty exemptions apply up to £250,000 so you'd only pay tax on the rest of £25,000. This is £1,250 as a non-first-time buyer and £0 as a first-time buyer.
If you staircase to 100% (and go over 80%), you pay stamp duty on your current share of £275,000 (provided the property value hasn't gone up). Frst time buyer shared ownership stamp duty relief is no longer applicable, as staircasing is considered a separate transaction. You pay £1,250 for shared ownership stamp duty*.
Check the current stamp duty rates and calculate the stamp duty on shared ownership by using our tool above.
Pros
- You only pay stamp duty on the first transaction and then again once you own 80%.
- You can benefit from first time buyer shared ownership stamp duty relief on the first transaction.
- Stamp duty costs are broken down into smaller sums which are easier to pay off.
Cons
- The property can increase in value, so you might end up paying more stamp duty over time.
- You only benefit from first time buyer relief on the first transaction, as staircasing is considered separately.
- Lenghtier process and you'd have to save up a large sum multiple times in order to pay it off.
How do you calculate stamp duty on shared ownership?
You calculate how much you're paying for the shared ownership share and apply it to the current stamp duty rates.
When working out what stamp duty to pay when paying in stages you'll need to calculate two sums if it is a new lease, or just the consideration on your share, if it is a resale.
Consideration on your share
You apply the standard rate of stamp duty applicable for the share you own. For example, a 50% share of a property worth £350,000 is £175,000. So you would pay £175,000 for that share of the property and attract shared ownership stamp duty on that value. As per the current stamp duty rates, anything below £250,000 is exempt, so you would not pay anything.
If you are eligible for relief on first time buyer shared ownership stamp duty, you can apply it to the consideration, but not the Net Present Value of Rent.
Net Present Value of Rent (NPV)
This is only applicable if you're not a first-time buyer and the total of your rent payments over the full length of your lease goes over £250,000. You pay 1% stamp duty above the £250,000 threshold.
For example, if the housing association charges 3% rent for their share worth £175,000, then the annual rent is £5,250.
On a 100-year lease, using the complex net present value formula, the total rent is £144,288, for which you pay no stamp duty as it falls under the £250,000 threshold.
If applicable, you would pay the stamp duty due on your share + the stamp duty due on the net present value of the rent. Net present value only applies on the first purchase, regardless of whether you pay market value election or pay your shared ownership stamp duty in stages.
The formula for calculating net present value is really complex, and it is usually calculated by your housing association. You might need to get tax advice if this applies to you.
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
