Since the Budget last week, first-time buyers have been exempted from SDLT but how does this affect those who are purchasing their first property from an RP through shared ownership schemes?
Those who opt to pay SDLT only on their share (rather than electing to pay on the full market value of the property) will not benefit from the new exemption. If the shared ownership property is valued at less than £300,000, the best option would be for buyers to elect to pay SDLT on the full amount (making a Market Value Election) which will allow them to take advantage of the exemption.
If the property is valued between £300,000 and £500,000, the decision will be trickier and will ride on the actual tax calculations - is it better to make a Market Value Election or to pay tax only on the share?
So, where, for example, the full market value of the property is £325,000 and the purchasers buy a 50% share:
- If they opt to pay SDLT on the initial 50% share, they cannot have the benefit of the exemption. The SDLT payable will be £750 and they will have additional SDLT to pay when they purchase further shares which would total £5,500 (or more if the property value increases).
- If they make a Market Value Election, then they would pay £1,250 at the outset and no further SDLT on the purchase of any future shares.
The effect is tax neutral on properties valued at more than £500,000.
The tax treatment for first-time buyers of non-RP-owned shared ownership homes is slightly different. We are discussing the implications with HMRC and the HCA and will update you on any developments.
For those involved in buying and selling shared ownership properties, it remains important to be correctly informed about SDLT options.
