Stamp Duty Land Tax on Shared Ownership Properties
Posted on 5th March 2020
In order to assist many in that first step onto the property ladder, more and more property buyers are purchasing shared ownership properties. As it says on the tin, this is where buyers purchase a share in the property only, and not the property in its entirety. At a later date, a further share in the property, or the remaining share, may be purchased, which is known as staircasing and allows for a gradual build up in ownership of the property. For more information on shared ownership properties and how they work, see our blog here.
Whilst the property purchasing process is exciting, our team of property solicitors in Garstang will tell you there are important items that should be considered carefully. One of which relates specifically to Stamp Duty Land Tax, and involves an important choice that is to be made, for those purchasing shared ownership property.
Stamp Duty on shared ownership properties can be made via one of two ways. Firstly, the buyer may opt to make a ‘one off’ payment on the total market value of the property, despite the share being purchased. For example, a 25% share in a £200,000.00 property is purchased. Where making payment via this option, the buyer would opt to pay SDLT on the total market value, at £200,000.00. This would mean that, in the event of purchasing future shares in the property, there would be no further SDLT due.
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Secondly, the buyer may opt to pay Stamp Duty in stages, in accordance with the share purchased. This figure is calculated on the basis of the lease premium, i.e. the amount paid and will depend on whether the same is above the current threshold.
In addition, there are further considerations to deliberate on here, which apply when purchasing a share in a new-build property. Where acquiring a new lease as part of the shared ownership process, your conveyancing solicitor would be required to consider any additional Stamp Duty that may be due. Your property solicitor would be assessing what is known as the ‘net present value’ of the rent that is to be paid over the term of the lease being acquired. Where such payments exceed the current threshold, payment would be required. For more information on the meaning of ‘net present value’ and how the additional payment may be required see, gov.uk, for further guidance.
Whilst there is no right or wrong option to choose in respect of the above, the same should be carefully considered. For example, where a prospective purchaser has no intention of staircasing to 100% ownership of the same, option one, in making a one off payment of SDLT on the full market value, may not be as beneficial as choosing to make staged payments, as in option two.
At MG Legal, although our conveyancing solicitors in Preston cannot decide what the best option for you may be, we can advise on how the processes work and the potential advantages and disadvantages of the same. The aim of our solicitors in Preston is to provide our valued clients with the necessary advice on matters, to allow for an informed decision to be made.
If, therefore, you are purchasing a shared ownership property, and require advice on Stamp Duty Land Tax, or have any other conveyancing query, contact our expert team today, at property@mglegal.co.uk.
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