Rent to Homebuy – How It Works Now


There have been changes, introduced by the Finance Act 2009, designed to simplify the Stamp Duty Land Tax (SDLT) position on ‘rent to homebuy’ (RTH) schemes.

An RTH scheme is one where a tenant takes on an assured shorthold tenancy and pays an intermediate rent (one which is more than an ‘affordable rent’ but at a discount to the full open market rent). The excess over the affordable rent is used to save for a deposit on the property. The tenant can elect to purchase the property under a shared ownership lease.
Prior to 22 April 2009, the assured shorthold tenancy and the shared ownership lease were normally linked transactions for SDLT, meaning that the values of the two interests were aggregated for SDLT purposes. This is no longer the case.
Under the new regime, SDLT can be assessed by reference to the open market value of the property, which is normally advisable when the value is below the SDLT threshold (currently £175,000). This will also mean that buying further shares in the property will not lead to an SDLT charge.
Alternatively, SDLT can be calculated relative to the percentage share purchased. Normally, this will mean that there is no SDLT issue until the tenant reaches 80 per cent ownership. At that point, the total amounts paid over time for acquiring additional shares in the property are aggregated to ascertain the appropriate SDLT band.
HMRC have a guide to SDLT on shared ownership properties at .
SDLT is a complex tax. Contact us for advice.


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