Stamp Duty

Stamp Duty Land Tax (Stamp Duty) is a tax levied by the government on the purchase of properties and is payable upon completion of the purchase of your property.  Stamp Duty is assessed as a percentage of the price of the property, and the rates applicable are:-

£0-£125,000 - Nil;

£125,001-£250,000 - 1% of total value;

£250,001-£500,000 - 3% of total value;

Above £500,000 - 4% of total value.

The Stamp Duty position on the purchase of a shared ownership property is slightly more complicated in that there are effectively 2 choices, namely:-

  • 1) You can elect to pay Stamp Duty on the total value of the property you are buying upon completion of the purchase. This will always be the right decision if the total value is £125,000 or less.

For example, if you are buying 50% of a property at a price of £60,000, then the total value of the property would be £120,000 and you would therefore choose to have the Stamp Duty assessed on the total value. This would mean the Stamp Duty would be nil and there would be no Stamp Duty payable later if you bought an extra share in the property.

If, however, you are paying £100,000 for a 50% share in the property then, if you chose this option, the total value of the property would be £200,000 and therefore Stamp Duty would be assessed at £2,000 (1%).

  • 2) The other option is that Stamp Duty can be assessed on the amount you actually pay for your share. So, for example, if you pay, as above, £100,000 for a 50% share you would not, under this option, pay any Stamp Duty, as the amount you were actually paying would be less than the Stamp Duty threshold.

This would always be the correct option to choose if you had no intention of ever staircasing your property to buy a higher share. Although you would not pay any Stamp Duty upon the completion of your purchase, there is the possibility of paying higher Stamp Duty in later years when you “staircase” to buy a larger share of your property.

If you “staircase” so you buy a total share in the property over 80%, then there is another assessment for Stamp Duty.

If, using the previous example, some years later the buyer purchases the remaining 50% from the Housing Association at a price of £120,000, the Stamp Duty under the complex staircasing calculation rules would be assessed at £7,800.

As you will see, Stamp Duty is more difficult in a shared ownership transaction than on a normal purchase.  As part of our service we will explain the options open to you but, as we cannot predict future prices or Stamp Duty rates, the final decision must be yours.