Stamp Duty Land Tax Rules for Shared Ownership Staircasing Transactions Explained

SDLT on Shared Ownership Staircasing Without a Market Value Election

Where a shared ownership buyer did not make a market value election when the lease was first granted, the original lease is taxed under the normal SDLT rules for leases. Later staircasing purchases may be exempt from SDLT, but only if the shared ownership conditions are met and the tenant’s total share immediately after the purchase is no more than 80%.

• The original grant of the lease may attract SDLT on any premium paid and on the net present value of the rent.
• Staircasing transactions can be exempt if they are made under a qualifying shared ownership lease and reduce the rent payable.
• The extra share bought must be calculated by reference to the property’s market value and expressed as a percentage of the property or its value.
• The key test is the tenant’s total share immediately after the staircasing transaction.
• If the total share is 80% or less, the staircasing step may be exempt; if it goes above 80%, the transaction is chargeable to SDLT.
• A final staircasing step to 100%, including acquiring the freehold reversion or full leasehold interest, is chargeable to SDLT.

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SDLT on shared ownership staircasing where no market value election is made

This page explains how Stamp Duty Land Tax applies when a shared ownership leaseholder buys extra shares in their home, known as staircasing, and no market value election was made when the lease was first granted. The key point is that some staircasing transactions are exempt, but that exemption stops once the leaseholder’s total share goes above 80%.

What this rule is about

Shared ownership leases are taxed under special SDLT rules. At the start of the lease, the buyer may or may not make a market value election. This page deals only with the position where no such election is made.

In that situation, the original grant of the lease is taxed in the normal way for leases. Broadly, that means SDLT may be charged on:

• any premium paid for the lease, and
• the net present value of the rent payable under the lease.

After that, the lease may allow the tenant to buy further shares in the property over time. Those later purchases are called staircasing transactions. The rule here decides when those later acquisitions are exempt and when they become chargeable.

What the official source says

HMRC’s manual says that, where no market value election was made, the grant of the shared ownership lease is taxed on the normal lease basis.

It then says that a staircasing acquisition is exempt from SDLT if:

• the lease satisfies the relevant shared ownership conditions referred to in HMRC’s guidance, and
• under the lease, the tenant has the right to make further payments to acquire additional interests in the dwelling, calculated by reference to the market value of the dwelling and expressed as a percentage of the dwelling or its value, and
• the staircasing payment also reduces the rent payable under the lease, and
• immediately after that acquisition, the total share held by the tenant or tenants does not exceed 80%.

If a staircasing transaction takes the tenant above 80%, or takes them to 100% so that they acquire the freehold reversion or the full leasehold interest, that transaction is chargeable to SDLT.

What this means in practice

The practical effect is that staircasing is not automatically taxable every time the tenant buys an extra share. If the lease is a qualifying shared ownership lease and no market value election was made, staircasing transactions up to and including 80% can be exempt.

That can make a major difference over time. A tenant might pay SDLT at the start on the lease premium and rent, but later staircasing steps may fall outside SDLT until the total ownership share goes beyond 80%.

The 80% threshold is the critical dividing line. You look at the tenant’s total share immediately after the staircasing transaction in question:

• 80% or less: the staircasing acquisition can be exempt, if the other conditions are met.
• More than 80%: that transaction is chargeable.

The rule also covers the final step to full ownership. If the tenant staircases to 100% and in doing so acquires the freehold reversion or the full leasehold interest, that transaction is chargeable to SDLT.

How to analyse it

A sensible way to analyse a shared ownership staircasing transaction is to ask these questions in order:

• Was there a market value election when the shared ownership lease was granted? If yes, this page is not dealing with that case. If no, continue.
• Was the original lease one that falls within the relevant shared ownership rules? HMRC’s manual cross-refers to the conditions for this.
• Does the lease give the tenant a contractual right to staircase by making further payments?
• Are those further payments for an additional share calculated by reference to the market value of the dwelling and expressed as a percentage of the dwelling or its value?
• Does the acquisition reduce the rent under the lease, as shared ownership staircasing normally does?
• What is the tenant’s total share immediately after the transaction?

If the answer to the last question is that the total share does not exceed 80%, the transaction may be exempt. If the total share goes above 80%, the transaction is chargeable.

This is an “immediately afterwards” test. The focus is on the position straight after the relevant staircasing step, not on what might happen later.

Example

Illustration: a buyer takes a qualifying shared ownership lease over a flat and does not make a market value election. SDLT on the grant of the lease is worked out on the normal lease basis.

Later, the leaseholder buys an extra share, taking their ownership from 50% to 75%. If the lease satisfies the shared ownership conditions and the staircasing payment is of the kind described in the rule, that acquisition is exempt because the total share immediately afterwards does not exceed 80%.

If the leaseholder later buys a further share taking them from 75% to 85%, that staircasing transaction is chargeable, because immediately afterwards their total share exceeds 80%.

Why this can be difficult in practice

The main difficulty is that the exemption depends on several linked conditions, not just on the percentage acquired. In practice, problems usually arise if people focus only on the 80% threshold and ignore the earlier questions.

For example:

• the lease must be within the relevant shared ownership rules;
• the further acquisition must be made under the lease’s staircasing provisions;
• the additional interest must be calculated by reference to market value and expressed as a percentage of the dwelling or its value; and
• the acquisition must reduce the rent payable under the lease.

Another point that can cause confusion is the difference between the tax treatment of the original lease grant and the tax treatment of later staircasing. The original grant is taxed on normal lease principles where no market value election is made. That does not mean every later staircasing payment is also taxed. The special exemption can apply to later staircasing steps, but only up to the 80% limit.

It is also important not to treat HMRC’s manual as if it were the legislation itself. The manual is explaining the statutory rule. If the facts are unusual, the exact lease terms and the legislation will matter.

Key takeaways

• Where no market value election is made, the original shared ownership lease is taxed on the normal lease basis.
• Later staircasing transactions can be exempt if the lease meets the shared ownership conditions and the tenant’s total share immediately afterwards does not exceed 80%.
• Any staircasing step that takes the tenant above 80%, including a move to 100%, is chargeable to SDLT.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Stamp Duty Land Tax Rules for Shared Ownership Staircasing Transactions Explained

View all HMRC SDLT Guidance Pages Here