Do you pay SDLT on the full market value or only the price paid in a shared equity freehold purchase?

Introduction

A common SDLT question arises where a buyer acquires a freehold home under a shared equity arrangement. The buyer pays part of the value up front, while the developer or scheme provider retains the balance under a legal charge, often with no rent and no interest. The practical problem is that mortgage papers may still refer to the full market value, which can lead a conveyancer to assume SDLT is due on that full figure.

The key issue is whether SDLT is charged on the full market value of the property, or only on the amount the buyer is actually paying at completion. That distinction can make a very large difference, especially where first-time buyer relief is in point.

The Question

A first-time buyer is purchasing a new-build freehold house through a shared equity scheme. The full market value is higher than the amount being paid at completion. The buyer is paying 75% now, while the remaining 25% is retained by the scheme provider as a legal charge. No rent or interest is payable on that retained amount.

The buyer’s conveyancer says SDLT is payable on the full market value because that figure appears in the mortgage and transfer paperwork. The buyer wants to know whether that is correct, or whether SDLT should instead be calculated only on the amount actually paid now, with any future liability dealt with later if further sums become payable.

Nick’s Explanation

Nick’s view was that, on these facts, SDLT is not charged on the full market value merely because the property is worth more or because the mortgage documentation records that value. His explanation can be summarised as follows:

• SDLT is charged by reference to the chargeable consideration actually given for the transaction.
• Where part of the value is retained under a legal charge, that security interest is not itself subject to SDLT.
• If a future amount may become payable later, that element can fall within the contingent or uncertain consideration rules, with deferment available under FA 2003 s 90.
• The market value election rules in Finance Act 2003, Schedule 9, paragraph 2 apply to shared ownership leases, not to a freehold shared equity purchase.
• First-time buyer relief is tested by reference to the chargeable consideration for the transaction in question, not simply the headline market value stated elsewhere in the documents.

In anonymised form, Nick’s central point was: “The legislation and HMRC guidance support SDLT being calculated on the amount actually paid now, with the retained element treated separately where it is secured and only payable in future if the relevant event happens.”

The Law

The starting point is Finance Act 2003, Schedule 4, paragraph 1(1), which provides that chargeable consideration means consideration in money or money’s worth given for the subject matter of the transaction.

That means SDLT is generally charged on what the purchaser gives for the acquisition. It is not automatically charged on an estimated, stated or background market value unless a specific statutory rule says otherwise.

Finance Act 2003, section 48(2)(a) states that an exempt interest includes “any security interest”. A legal charge is a security interest. So where a seller or scheme provider retains an amount by way of legal charge, that security mechanism is not itself a separate land interest charged to SDLT.

Finance Act 2003, section 51 deals with contingent, uncertain or unascertained consideration. Where part of the consideration may become payable only if a future event occurs, special rules apply. Finance Act 2003, section 90 then allows the purchaser to apply to HMRC to defer the tax referable to contingent or uncertain consideration.

The procedural rules for deferment are found in the Stamp Duty Land Tax Administration Regulations 2003, Part 4.

For first-time buyer relief, the relevant rules are in Finance Act 2003, Schedule 6ZA. For transactions completing under the post-April 2025 bands referred to in the source material, the relief gives:

• 0% on the first £300,000
• 5% on the slice from £300,001 to £500,000
• no relief if the chargeable consideration exceeds £500,000

Finally, Finance Act 2003, Schedule 9, paragraph 2 allows a market value election in the case of a shared ownership lease. That rule is important because it shows that Parliament created a specific market value mechanism for a specific type of transaction. It does not apply generally to freehold shared equity purchases.

HMRC’s SDLT Manual at SDLTM50900 and SDLTM50900A also discusses contingent and uncertain consideration and the deferment approach.

Analysis

The analysis turns on the legal structure of the arrangement.

Step 1: identify what the buyer acquires now.

Here, the buyer acquires the freehold. That matters because this is not a shared ownership lease. As a result, the special market value election in Schedule 9, paragraph 2 is not in play.

Step 2: identify what the buyer is actually paying now.

If the buyer is paying £446,250 at completion, that is the immediate consideration actually given. Under Schedule 4, paragraph 1(1), that is the obvious starting point for SDLT.

Step 3: identify the status of the retained 25%.

On the facts given, the retained share is not rent. It is not interest. It is secured by a legal charge. A legal charge is a security interest, and section 48(2)(a) treats a security interest as an exempt interest. That does not mean future payments can never attract SDLT, but it does mean the security itself is not what triggers SDLT on the full retained value at completion.

Step 4: ask whether the retained amount is presently payable or only potentially payable later.

If the buyer only becomes liable to pay more on a later event, such as buying out the retained share or triggering payment on sale, that future amount is contingent or uncertain consideration. In that case, sections 51 and 90 become relevant, and HMRC’s manual supports the use of deferment.

Step 5: test first-time buyer relief against the chargeable consideration.

If the chargeable consideration at completion is £446,250, that is within the £500,000 ceiling for the post-April 2025 version of first-time buyer relief referred to in the source material. On those figures, relief should still be available, because the relevant figure is the chargeable consideration for the transaction, not the higher market value shown elsewhere in the paperwork.

Step 6: calculate the SDLT on that basis.

Using the figures provided and the post-April 2025 first-time buyer rates:

• £0 on the first £300,000
• 5% on the remaining £146,250

That produces SDLT of £7,312.50.

Step 7: consider why the conveyancer may have reached the wrong view.

In practice, confusion often arises because:

• the transfer or mortgage refers to the full market value
• the scheme resembles shared ownership in commercial effect, even though it is legally different
• the retained share is misunderstood as part of the present consideration rather than a secured future amount

But none of those points, by themselves, changes the statutory analysis. A full market value statement in mortgage documentation does not automatically make the whole value chargeable for SDLT.

Outcome

On the facts described, the better view is that SDLT should be calculated on the amount actually paid at completion, not on the full market value of the property.

Where the buyer pays £446,250 now for a freehold purchase under a shared equity structure, and the remaining 25% is retained under a legal charge with no rent or interest, the retained element is not automatically taxed up front as if it were present consideration for SDLT purposes. Instead, the contingent or uncertain consideration rules and deferment provisions are the relevant framework.

On the figures given, and using the first-time buyer rates referred to in the material, the SDLT would be £7,312.50.

Practical Steps

If you are dealing with this type of transaction, the following steps are sensible:

1. Obtain the scheme documents and confirm the exact legal structure. Check whether it is truly a freehold shared equity arrangement and not a shared ownership lease.
2. Identify the amount actually payable at completion and separate it from any future amount secured by legal charge.
3. Check whether the retained amount is contingent, uncertain or only payable on a later event.
4. Review Finance Act 2003, Schedule 4, paragraph 1(1), section 48(2)(a), section 51, section 90, and Schedule 9, paragraph 2.
5. Review HMRC manual guidance at SDLTM50900 and SDLTM50900A.
6. Prepare the SDLT return on the basis of the actual chargeable consideration being paid at completion, if that matches the legal analysis.
7. Consider including an application under FA 2003 s 90 for deferment of any tax referable to contingent consideration.
8. Claim first-time buyer relief if the statutory conditions are met.
9. If the conveyancer remains unsure, ask for their reasoning in writing and test it against the legislation rather than against the headline market value alone.

As a practical filing point, the approach suggested in the source material was to:

• enter the amount actually paid as the chargeable consideration
• indicate that part of the consideration is contingent, where appropriate
• attach a short letter headed “Application under FA 2003 s 90 – Contingent Consideration”
• claim first-time buyer relief

Conclusion

In a freehold shared equity purchase, SDLT is not automatically charged on the full market value just because that value appears in the mortgage or transfer papers. The key question is what consideration is actually being given now, and whether any further amount is only contingent and secured by legal charge. On the facts discussed here, the stronger legal analysis is that SDLT is charged on the amount paid at completion, with the future retained element dealt with under the contingent consideration and deferment rules.

Legal References Used

• Finance Act 2003, Schedule 4, paragraph 1(1)
• Finance Act 2003, section 48(2)(a)
• Finance Act 2003, section 51(1)
• Finance Act 2003, section 90(1)
• Finance Act 2003, Schedule 6ZA
• Finance Act 2003, Schedule 9, paragraph 2
• Stamp Duty Land Tax Administration Regulations 2003, Part 4
• HMRC Stamp Duty Land Tax Manual SDLTM50900
• HMRC Stamp Duty Land Tax Manual SDLTM50900A

This page was last updated on 22 March 2026.

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