Stamp Duty holiday and buying a shared ownership property


When you first purchase a shared ownership property you have a choice about how you pay stamp duty. You can either make a one-off payment based on the total market value of the property. Or, you can choose to pay stamp duty in stages. That is, you pay what is owed on the initial share you buy, then pay again if you buy more shares.

If you make a one-off payment, then you won’t have to pay further stamp duty if you choose to staircase. This could be beneficial if you think the value of your property will rise substantially before you buy further shares.

If you choose to pay stamp duty in stages when you first purchase a shared ownership home, then you could face a tax bill when you staircase. This depends on how much more of your property you buy. Until you own 80% of the property there is no stamp duty to pay. Once you reach 80% you pay stamp duty on the transaction that took you over 80% and any further transactions.

Choosing to pay the stamp duty in full at the time of purchase is usually a good option if the full property value is below the tax-free allowance of £125,000 or £300,000 for first time buyers. Even where a client says they are unlikely to buy further shares, it is still sensible to ‘pay’ tax based on the full market value where the actual liability is zero as this would mean there is no tax to pay if additional shares are purchased at a later date. However, where the full market value is above the tax-free allowance, as is often the case for properties throughout the South-East, many clients chose to pay in stages rather than pay tax unnecessarily now when they may never purchase additional shares in the future.

The recently announced stamp duty holiday has temporarily increased the tax-free threshold to £500,000 irrespective of whether the purchaser is a first-time buyer. This temporary increase which is in place until 31st March 2021 means that anyone buying a shared ownership property before that date is best advised to elect for stamp duty to be calculated on the basis of the full market value where such value is £500,000 or less. Such an election means there is no tax to pay now or when further shares may be acquired in the future.

If you have any questions regarding residential conveyancing, including shared ownership, please contact Stephen Carr on 01306 884432 or email