Stamp Duty Land Tax Payment for Shared Ownership & Transfer of Land Lease

Stamp Duty Land Tax (SDLT) is a tax payable to HMRC (Her Majesty’s Revenue and Customs) on all residential and non-residential properties across England and Ireland. The Scottish equivalent of this is Land and Buildings Transaction Tax while the Welsh equivalent is called Land Transaction Tax.

In case of England and North Ireland, the tax is only applicable to certain kinds of property and land which meets a specific criteria.

When do I need to pay SDLT?

SDLT is only payable under a specific set of circumstances only as we pointed out, although it is more often paid than not.

The following are the circumstances under which you need to pay SDLT:

• Freehold property
• Lease extensions
• New or existing leasehold
• Transfer of land for payment
• Shared ownership scheme

For this article, however, we’re going to pick off the last two only and elaborate on those in order to dial you in on how SDLT works when we consider two unique scenarios.

Transfer of land for payment

Anytime ownership of property is transferred between two owners (joint) outside of a legal agreement, SDLT may need to be paid.

The co-owner will pay tax on the total chargeable consideration only, that is, as long as it is over the typical threshold of £125,000 (residential properties) and £150,000 (non-residential properties).

Also, when it comes to transferring of land for payment, the total chargeable price is made up of the other 50% of the equity and liability of the remaining mortgage.

Shared ownership scheme

If you buy property from an approved public body through a shared ownership scheme, you might need to pay SDLT. You have the option of paying in stages or as a one-off payment, although the examples that apply are the same:

• Housing associations and housing actions trusts
• Local housing authorities
• The Commission for New Towns
• The Northern Ireland Housing Executive
• Development corporations

Should you decide to make a one-off payment, SDLT will be paid at the residential rate only and based on the total market value election – and it doesn’t matter if you’re buying just one share. Once you buy a single share, no SDLT is payable until you own at least 80+ percent of the property shares.

The market value election may be explained as the total market value of a property and nothing else. It’s important to understand this because it means you will pay SDLT on the property’s total value only when you make a one-off payment, that is. Similarly, when you pay in stages, you will pay SDLT on your consideration or lease premium only.

Another thing to remember is that when you pay in stages, the first payment must be made out on the lease premium, but is should be above the threshold values we mentioned above. If it’s below that threshold, no SDLT is payable, although a return needs to be submitted.

There’s a lot more to SDLT than what we have been able to expand in this article. Our friendly financial adviser is only a phone call away: 01753 373505 or  Get in touch with us for free initial consultation now.

Another useful link from HMRC Stamp Duty Land Tax: shared ownership property – GOV.UK (www.gov.uk)