Guidance on Completing SDLT1 for Shared Ownership and Right to Buy Transactions

SDLT returns for shared ownership leases and staircasing

Completing an SDLT return for shared ownership is not just a form-filling exercise. The correct return depends on whether the transaction is the original lease or a later staircasing step, whether a market value election was made at the start, whether the buyer ends up with the freehold or a new lease, and whether the transaction is treated as linked. Some transactions must still be reported even when no SDLT is payable.

• The key starting point is to identify the legal nature of the transaction: original shared ownership lease, further staircasing purchase, or the final step to full ownership.
• A market value election made on the original grant can change both the SDLT charge and what figures must be entered on the SDLT1 return.
• Depending on the case, the return may need to include market value, premium paid, open market premium, rent, or the net present value of rent.
• Notifiability is not the same as tax liability: some nil-tax transactions still need an SDLT return, while others are only reportable if the relevant payment exceeds the threshold.
• Linked transaction treatment varies: some staircasing transactions above 80% are linked to the original lease and earlier staircasing, but some final freehold acquisitions without a market value election are treated as not linked.
• In practice, common problem areas are proving whether a market value election was made, identifying whether the final interest is a freehold or a new lease, and calculating the correct values from the documents.

Scroll down for the full analysis.

How to complete an SDLT return for shared ownership leases and staircasing transactions

This page explains HMRC’s notes on completing the SDLT1 return for certain shared ownership transactions. The source material is mainly about form-filling, but the practical issue is more important than that: whether a shared ownership transaction is notifiable, what type of transaction code to use, and which amounts go into the return. That matters because shared ownership transactions are taxed differently depending on whether a market value election was made and whether the tenant is acquiring further shares or the final interest in the property.

What this rule is about

Shared ownership transactions do not all follow the same SDLT pattern. The SDLT treatment depends in particular on:

• whether the transaction is the original grant of the shared ownership lease or a later staircasing transaction,
• whether the buyer made a market value election when the lease was first granted,
• whether the property interest being acquired is freehold or leasehold, and
• whether the transaction is treated as linked to the original lease or earlier staircasing transactions.

HMRC’s page is not setting out the full legal rules on when SDLT is chargeable. It is giving filing instructions for transactions that are already within the SDLT return system. The main use of the page is to help identify:

• whether the transaction must be notified,
• which SDLT1 boxes need to be completed, and
• what figure should be entered in each box.

What the official source says

The official material covers several common shared ownership situations.

For the original grant of a shared ownership lease:

• If there is a market value election and the freehold reversion is available, box 2 uses code L, box 14 shows the tax on the full market value, box 20 is nil, box 22 shows the market value in the lease, and box 24 shows the tax on that market value.
• If there is a market value election but the property is leasehold, the return includes both the open market premium and the net present value of the minimum rent. Box 14 is the total of the tax in boxes 24 and 25.
• If there is no market value election, the return includes the premium for the lease and the net present value of the initial rent over the full term. Again, box 14 is the total of the tax in boxes 24 and 25.

For staircasing transactions:

• Where there was no market value election and the tenant acquires a share taking them above 80%, the transaction is only notifiable if the consideration exceeds the SDLT threshold. For that purpose it is treated as linked to the grant of the lease and any earlier staircasing transaction.
• Where there was a market value election and the tenant acquires the freehold reversion, the transaction is still notifiable even though no tax is payable.
• Where there was a market value election and the tenant receives a new lease on acquiring the maximum leasehold interest available, the transaction is also notifiable even though no tax is payable.
• Where there was no market value election and the tenant acquires the freehold reversion, the transaction is notifiable if the final payment exceeds £40,000, even if no tax is payable. For that purpose it is treated as not linked to the original lease or earlier staircasing transactions.
• Where there was no market value election and the tenant receives a new lease on acquiring the maximum leasehold interest available, the return must include both the final payment and the NPV of the rent under the new lease.

What this means in practice

The most important practical point is that you cannot complete the SDLT1 correctly unless you first identify the exact legal character of the transaction.

In shared ownership cases, people often focus only on the amount being paid at the time. HMRC’s instructions show that this is not enough. You also need to know:

• whether the buyer elected to pay SDLT on the full market value at the start,
• whether the current step is just another staircasing purchase or the final step to 100%,
• whether the final step gives the buyer the freehold or a new lease, and
• whether the transaction should be treated as linked or not linked for notification purposes.

This affects both tax and filing. Some transactions are notifiable even when the tax due is nil. Others are only notifiable if a payment threshold is crossed. The return may need to show:

• the full market value,
• the premium actually paid,
• the open market premium,
• the minimum or initial rent, or
• the net present value of rent.

That means a conveyancer or taxpayer should not assume that a nil tax result means no return is needed.

How to analyse it

A sensible way to analyse one of these transactions is to work through the following questions in order.

1. Is this the original grant of the shared ownership lease, or a later staircasing transaction?

2. If it is a staircasing transaction, is the tenant simply buying a further share, or are they now acquiring the final interest so that they receive the freehold or a new lease?

3. Was a market value election made on the original grant of the lease?

   This is critical because HMRC’s filing treatment changes significantly depending on the answer.

4. Is the underlying property freehold or leasehold?

   For an original grant with a market value election, HMRC distinguishes between a case where the freehold reversion is available and a case involving leasehold property.

5. What counts as the chargeable amount for the return?

   Depending on the case, this may be the market value, the premium, the open market premium, the final payment, the initial or minimum rent, or the NPV of rent.

6. Is the transaction notifiable?

   Do not answer this just by asking whether tax is payable. HMRC’s notes make clear that some nil-tax transactions are still notifiable, while some other transactions are only notifiable if the relevant consideration exceeds the applicable threshold.

7. If linked transaction treatment matters, what is the correct linkage?

   HMRC’s notes specifically say that some staircasing transactions above 80% are treated as linked to the original lease and earlier staircasing transactions, while acquisition of the freehold reversion without a market value election is treated as not linked for this purpose.

Example

Illustration: a buyer took a shared ownership lease without making a market value election. Years later, they staircase again and this purchase takes their interest above 80%, but not yet to the final freehold or maximum leasehold interest.

Under HMRC’s notes, this later transaction is only notifiable if the consideration exceeds the SDLT threshold. For that purpose, it is treated as linked to the original grant and earlier staircasing transactions. If it is notifiable, the return uses code O in box 2, the payment for the additional share goes in box 10, box 13 is marked “yes”, and boxes 16 to 25 are not completed.

By contrast, if the same buyer later acquires the freehold reversion without having made a market value election, HMRC says that transaction is tested differently. It is notifiable if the final payment exceeds £40,000, even if no tax is payable, and for this purpose it is treated as not linked to the original lease or earlier staircasing transactions.

Why this can be difficult in practice

The form instructions are short, but the underlying legal analysis can be awkward.

• The first difficulty is identifying whether a market value election was made on the original grant. If the file is old, that may not be obvious from current documents alone.

• The second is understanding what the later transaction actually grants. A final staircasing step may result in acquisition of the freehold reversion, or instead a new lease on acquiring the maximum leasehold interest available. HMRC treats those differently on the return.

• The third is linked transaction treatment. HMRC’s notes do not apply one single rule across all staircasing cases. Whether the transaction is linked depends on the type of staircasing event and whether a market value election was made.

• The fourth is that notifiability and tax liability are not the same thing. A transaction can require a return even where the tax due is nil.

• The fifth is that the page is mainly about completing boxes on SDLT1, not about proving the figures. In practice, values such as market value, open market premium, minimum rent and NPV must still be identified correctly from the transaction documents and the SDLT rules.

Key takeaways

• In shared ownership cases, the SDLT return depends heavily on whether a market value election was made and what kind of staircasing transaction is taking place.
• A nil tax result does not always mean no SDLT return is required.
• Before completing SDLT1, check whether the transaction is linked, whether it involves freehold or leasehold, and whether the figures required are market value, premium, rent, NPV, or a combination of these.

Source: HMRC SDLTM27080, “Reliefs: Right to buy transactions, shared ownership leases etc: Notes to assist the completion of the SDLT1 land transaction return”.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on Completing SDLT1 for Shared Ownership and Right to Buy Transactions

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