Stamp Duty Land Tax for Staircasing

09/11/2017
There are 2 ways you can pay for your shared ownership stamp duty land tax (SDLT):

1
Pay a one-off sum - this is called a Market Value Election; or (like most shared ownership buyers)

2
Pay any stamp duty due in stages (this is where the term staircasing is used).

By opting to pay the stamp duty in stages, when you come around to buying a greater share in the property you'll end up having to pay any stamp duty due, if the share you buy is over 80%. We specialise in the complex work of staircasing and work with all housing associations. For a fixed fee quote call 0333 344 3234 or email help@samconveyancing.co.uk.

How is the first stage calculated?

Back when you purchased your shared ownership property you would have paid any stamp duty due based on the consideration and the net present value of the rent payments to the housing association. You can read more about this calculation here - Stamp Duty for Shared Ownership.

You'll need to know the amount you paid on your first transaction to help you calculate the amount of stamp duty you need to pay when you staircase.

Need advice? Call 0333 344 3234 for help


*Specialist Staircasing Solicitors - Fast Communication - 5 Star Google Reviews

Fixed Fee, No Sale No Fee and Unbeatable Value Solicitors.

 

How much stamp duty do you pay when you staircase?

You'll need the following information to help you calculate the stamp duty you need to pay when you staircase:

1
How much was the total value of the property when you originally purchased?

2
What share did you buy?

3
How much is the property currently valued at (in full)?

4
How much are you staircasing to?

Once you have this information you can then work out what stamp duty you are liable for.

Example of shared ownership property staircasing to 100%


Original
purchase
Current 
staircase
Total
What is your share?

25% 75% 100%
Consideration payable
(Used for stamp duty 
calculation)

£72,500 £255,000 £327,500
What is the property's total
market value?
£290,000 £340,000

In the example above, stamp duty is payable on the £327,500 using the bespoke staircasing stamp duty calculation which we will come on to next.

Stamp Duty Land Tax for Staircasing
Remember - regardless of the total consideration paid, if your ownership of the property does not exceed 80%, then you do not need to pay any stamp duty.


How do you calculate the stamp duty on the amount you staircase?

In the example above where we staircased up to 100% we need to pay the stamp duty on the £327,500 at an apportioned rate.

The following example follows on from above and in this example no stamp duty was paid when the original 25% was purchased.

Property Price
From
Property Price
To
Rate of
Stamp Duty
Consideration per
to stamp duty
bracket

Stamp Duty

Apportioned rate Stamp Duty to Pay
£0

£125,000

0%

£125,000

£0

£125,001

£250,000

2%

£125,000

£2,500

0.7786

£1,947

£250,001

£925,000

5%

£77,500

£3,875

0.7786

£3,017

£327,500
£4,964

The apportioned rate is calculated by taking the consideration paid for the 75%, which is £255,000 and then dividing it by the total consideration payable which is £327,500 which gives a figure of 0.7786.

This apportioned rate is applied against the total stamp duty and the balance is what you have to pay which is £4,964.

Stamp duty rates are based on the current bands which are viewable here - Stamp Duty Calculator

Paying stamp duty in stages and buying further shares

Should you choose to buy more shares in a property, called ‘staircasing’, you don't pay any more SDLT until your share reaches more than 80%. If your percentage ownership share of the property goes over 80% you pay any SDLT due on both:

  • the transaction that took you over 80%
  • any further transactions

The amount of SDLT due is based on the total amounts you’ve paid for the property so far unless the staircasing payment does not take your property over an 80% share. This is because the transactions count as linked transactions for SDLT.

This also means that in some cases you can pay tax (or more tax) on the first grant of the lease.

If the first grant of the lease took place on or after 12 March 2008, this transaction doesn’t count as linked with the rest of the transactions and is excluded.

Stamp Duty Land Tax for Staircasing

Further examples of SDLT for staircasing

Let's assume your bought a first premium 25% in a property, then subsequently staircased to 75%. You don't have to pay SDLT on the staircase transaction regardless of its absolute value. However, if you increase your share from 25% to 85% in one transaction, you pay SDLT on the value of that transaction essentially because you now will own more than an 80% share.

You then calculate the subsequent rate of SDLT due on any further transactions to increase your share of the property in the same way.

Example 1

On 1 March 2008 you spend £80,000 on a 50% share in a property with a total market value of £160,000.

You later buy a further 25% share in the property for £40,000, taking your share to 75%.

On 5 December 2014, you buy the final 25%, including the freehold, for £40,000. You become the outright owner of the property. The SDLT you pay on this transaction is £175 - that’s the total property value of £160,000 at 0% on £125,000 and 2% on £35,000 which is £700.

Share of the property owned after the latest transaction

Amount paid for the latest transaction

Total amount paid to date - used to work out the rate of SDLT

SDLT payable

Is a SDLT return needed?

50%

£80,000

£80,000

zero

yes

75%

£40,000

£120,000

zero

no

100% including getting the freehold

£40,000

£160,000

£175

yes


Additional tax calculation
As the first lease was granted before 12 March 2008, you’ll also pay £800 on the first lease premium (£80,000), because this first transaction is linked with the later transactions for SDLT.

The total consideration for all the linked transactions of £160,000 is now more than the 0% SDLT threshold. This tax is calculated under the rules which applied at the date the lease was first granted, so the tax due is 1% of £80,000 = £800.

Example 2

On 1 March 2012 you spend £75,000 on a 25% share in a property. It has a market value of £300,000.

On 5 December 2014, you increase your share in the property to 85% at a cost of £180,000. Sometime later you pay £30,000 for a further 10% share, and later still, £15,000 for the final 5% share.

The SDLT you’ll pay on the second transaction is £1,941 (total consideration of £255,000 at 0% on £125,000, 2% on £125,000 and 5% on £5,000 = £2,750, apportioned 180:255).

The SDLT you’ll pay on the third transaction is £447 (total consideration of £285,000 at 0% on £125,000, 2% on £125,000 and 5% on £35,000 = £4,250, apportioned 30:285).

You’ll also pay a further £743 on the second transaction and HMRC need another return under section 81A Finance Act 2003. There’s no further tax to pay on the first transaction as this doesn’t count as a linked transaction.

The SDLT you’ll pay on the fourth transaction is £250 (total consideration of £300,000 at 0% on £125,000, 2% on £125,000 and 5% on £50,000 = £5,000, apportioned 15:300).

You’ll pay a further £316 on the second transaction and £53 on the third transaction and send further returns under the rules set out in section 81A FA 2003. There’s no further tax to pay on the first transaction as this doesn’t count as a linked transaction.

Share of the property owned after the latest transaction

Amount paid for the latest transaction

Total amount paid to date - used to work out the rate of SDLT

SDLT payable

Is a SDLT return needed?

25%

£75,000

£75,000

zero

yes

85%

£180,000

£255,000

£1,941

yes

95%

£30,000

£285,000

£447

yes

100% including getting the freehold

£15,000

£300,000

£250 (plus additional tax for transactions 2 and 3, £743 + £316 + £53 = £1,112)

yes


Additional tax calculation
£180,000 (transaction 2) ÷ £285,000 (total paid transaction 3) x £4,250 (tax due on total consideration) = £2,684.
Tax due on transaction 2 = £2,684.
Tax paid to date on transaction 2 = £1,941.
Additional tax to pay on transaction 2 = £743.

*Specialist Staircasing Solicitors - Fast Communication - 5 Star Google Reviews


 
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