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Your Guide to Shared Ownership Homes and How It Works

Posted by: CJCH Solicitors | 12th February 2025

Are you dreaming of owning your own home but struggling to save the hefty deposit required? Shared ownership properties might be the solution you’ve been waiting for. This government-backed scheme offers a stepping stone onto the property ladder, even if you’re not able to afford the full cost of a home upfront. In this guide, we’ll explore how shared ownership works and help you understand how the role of stamp duty, otherwise known as Land Transaction Tax (“LTT”) in Wales, applies to the process.

What is Shared Ownership?

Shared ownership is a scheme designed to make homeownership more accessible for people who are unable to buy a home outright. Rather than purchasing a home at its full market value, you buy a share (typically between 25% and 75%) of the property. You then pay rent on the remaining share, which is usually owned by a housing association or a private landlord.

One of the biggest advantages of shared ownership is the significantly lower upfront cost. By owning a smaller share, you’re only responsible for a smaller deposit and mortgage payments, making it an appealing option for first-time buyers or those who need financial support to get on the property ladder.

How Does Stamp Duty or Land Transaction Tax (LTT) Affect Shared Ownership?

When you purchase a shared ownership property, you may be wondering how stamp duty or LTT applies. The rules can be tricky, so let’s break it down:

In most cases, stamp duty and LTT are calculated on the full market value of the property, not just the share you are purchasing. This means that even if you’re only buying a 25% share of a home, you could be liable to pay stamp duty or LTT based on the entire property’s value. This can come as a surprise to many buyers, especially when the market value of the property is high.

However, there’s a silver lining! If the price of your share is below the stamp duty threshold, you may not have to pay any at all. Currently, you will not pay stamp duty if the share you are purchasing is valued below £250,000. This threshold will be changing to £125,000 on 1 April 2025.

How to Minimise Stamp Duty on Shared Ownership:

  • First-time buyers: If you’re a first-time buyer and the price of the share you are purchasing is below £425,000, you could be eligible for a stamp duty exemption on the first £425,000 of the property’s value. This amount will be changing to £300,000 on 1 April 2025. (Please note that there is no such exemption for LTT)
  • Stamp duty on the full market value: If you’re buying a larger share (e.g., 50% or more), you may be liable for stamp duty on the full market value. This means it’s important to factor this cost into your budget when considering shared ownership.
  • Step-by-step approach: Many shared ownership buyers start by purchasing a smaller share (e.g. 25%) with the option to buy more shares over time in a process known as “staircasing.” When you staircase, you may have to pay stamp duty on any additional shares you buy, but only at the point of purchase.

Key Points

  1. Shared Ownership offers a fantastic way to enter the housing market with a smaller deposit and lower monthly payments.
  2. Stamp Duty and Land Transaction Tax on shared ownership is typically calculated on the full market value of the property, but there are ways to reduce or avoid it depending on the price of the share you’re buying.
  3. First-time buyers in England might be able to take advantage of exemptions and discounts to make stamp duty more manageable.
  4. It’s important to consult with a legal expert to understand your specific obligations and help you navigate the complexities of both shared ownership and stamp duty.

Don’t let the challenges of buying your own home discourage you as with the right information and support, homeownership is within reach.

At CJCH Solicitors, we specialise in guiding our clients through the shared ownership process, ensuring they are fully informed and confident in their decisions. If you’re considering a shared ownership property, contact us today to learn how we can help you make your homeownership dream a reality.