Stamp Duty on Inherited Property UK (2026): Is SDLT Payable When You Inherit a Property?

NO — inheriting a property does NOT itself trigger a Stamp Duty Land Tax (SDLT) charge. SDLT is a tax on PURCHASES and acquisitions of land and property — it is triggered by a chargeable transaction, which is a transfer for 'chargeable consideration'. When a property is inherited: (1) DEATH DOES NOT TRIGGER SDLT: the transfer of property on death — whether under a will, under intestacy, or by survivorship on a joint tenancy — is NOT a chargeable transaction for SDLT purposes. SDLT is not payable by the beneficiary or the estate when property passes on death; (2) THE LEGAL POSITION: the Finance Act 2003 (which governs SDLT) provides that certain transactions are exempt or not chargeable. A transfer effected by a will or under intestacy is not a land transaction within the SDLT legislation — no SDLT arises; (3) PROBATE — NO SDLT ISSUE: the personal representatives do not pay SDLT when they assimilate the estate's property. Vesting of property in personal representatives on death does not trigger SDLT; (4) TRANSFERRING PROPERTY TO A BENEFICIARY: once probate is granted, the personal representatives ASSENT (transfer) the property to the beneficiaries. An assent of property from personal representatives to a beneficiary is also NOT subject to SDLT — provided it is carried out in the course of the administration of the estate; (5) WHAT IS PAYABLE ON DEATH: the estate may be subject to INHERITANCE TAX (IHT) — but not SDLT. The Probate Registry charges a probate fee. These are distinct from SDLT which is a transaction tax.

The SDLT additional dwelling surcharge (currently 3% from April 2016, rising to 5% from 31 October 2024) can apply in certain inheritance-related scenarios — but there is a specific relief for inheriting a major interest in a dwelling: (1) THE CORE RULE — ADDITIONAL DWELLING SURCHARGE: the 3% (now 5%) SDLT surcharge applies when a person PURCHASES a residential property and at the end of the transaction they own two or more residential properties. This can affect beneficiaries who already own their own home and then inherit a property; (2) THE INHERITANCE EXCEPTION — FA 2003 Sch.4ZA: where a person INHERITS a major interest in a dwelling (at least 50% of the beneficial interest in a residential property), they are granted an 18-MONTH GRACE PERIOD from the date of inheritance. During this 18-month period: (a) any subsequent purchase of a main residence will NOT attract the additional dwelling surcharge — even though the person technically owns two properties (their inherited home + the one they are buying); (b) the inherited property is ignored for the purpose of the additional dwelling surcharge count during the 18-month window; (3) PRACTICAL EXAMPLE: a person inherits their parent's house and already owns their own home. They then want to buy a new (larger) home and sell their existing one. Without the relief, they might be subject to the 5% surcharge on the new purchase. With the 18-month relief (if within 18 months of inheriting), the inherited home is ignored for the surcharge calculation; (4) IF THE INHERITED PROPERTY IS RETAINED: if the 18-month grace period expires and the beneficiary still owns both the inherited property and their own home, any subsequent purchase of another property WILL attract the additional dwelling surcharge — because they own more than one property; (5) MINOR INTEREST: if a beneficiary inherits a MINOR interest (less than 50%) in a residential property, the inheritance exception does not apply — they are treated as owning one (minor) interest, and the surcharge position on any purchase is assessed normally.

Where a property is inherited by two or more beneficiaries and one wishes to acquire the others' shares, SDLT CAN arise on that transaction: (1) THE PURCHASE OF CO-HEIRS' SHARES: when one co-inheritor pays the others for their share of the inherited property, that payment is CHARGEABLE CONSIDERATION — a purchase. SDLT applies on the consideration paid: (a) each co-heir who sells their share to the remaining co-heir is in effect selling a property interest; (b) the purchasing co-heir pays SDLT on the amount they pay (not on the total property value — only on the consideration paid for the other shares); (2) EXAMPLE: three siblings inherit a property worth £300,000 in equal shares (each owns one-third). Sibling A pays £200,000 to buy out siblings B and C. SDLT is payable by sibling A on £200,000 (the consideration paid) — not on the full £300,000. If sibling A already owns their own home, the 5% additional dwelling surcharge may also apply; (3) TRANSFER OF EQUITY: an alternative is a TRANSFER OF EQUITY (where no money changes hands — the co-inheritors simply gift their share to the remaining co-heir). If there is no consideration (no money paid), SDLT is not payable. However, if the property has a mortgage, and the remaining co-heir takes on the full mortgage liability, the chargeable consideration for SDLT includes the value of that mortgage debt assumed; (4) GIFTS AND FAMILY TRANSACTIONS — NO SDLT IF NO CONSIDERATION: where one beneficiary simply gifts their inherited share to another (e.g. a sibling), and there is no consideration (no money and no mortgage assumption), no SDLT arises. However, for IHT purposes, such a gift may be a PET and should be documented; (5) SDLT RETURN REQUIREMENT: where a chargeable transaction arises in connection with an inherited property, an SDLT return (SDLT1) must be filed within 14 days of the effective date of the transaction, and any SDLT due must be paid.

A deed of variation (also called a deed of family arrangement) redirects an inherited asset from the original beneficiary to a different recipient. Whether it triggers SDLT depends on the consideration involved: (1) DEED OF VARIATION FOR NO CONSIDERATION — NO SDLT: a deed of variation made within two years of death that redirects property for NO CONSIDERATION (no money changes hands) is NOT subject to SDLT. It is treated as a redirect from the original will — the property simply passes directly from the estate to the varied beneficiary; (2) DEED OF VARIATION WITH CONSIDERATION — SDLT MAY APPLY: if a deed of variation is made in exchange for consideration (e.g. one beneficiary pays another to redirect property to them), the payment is chargeable consideration for SDLT on the land element. The recipient of the consideration pays SDLT on the value received; (3) EXAMPLE: a son inherits the family home under his mother's will. He agrees to redirect it to his sister in exchange for her giving up her claim to other estate assets worth £150,000. The sister's acquisition of the house may be treated as a purchase for SDLT purposes (the quid pro quo is the £150,000 equivalent). Specialist SDLT advice is essential; (4) IWTA 1984 s.142 — THE TWO-YEAR WINDOW: to obtain IHT (and CGT) benefits from a deed of variation, it must be made within two years of the date of death. This same two-year window is relevant for SDLT where the variation is made without consideration; (5) SDLT AND ADDITIONAL DWELLING SURCHARGE IN DEED OF VARIATION: if the redirected property is a residential property and the recipient already owns another property, the 5% additional dwelling surcharge may apply to the receipt (if there is consideration). Take specialist SDLT advice before completing any deed of variation involving property.

Several additional SDLT reliefs and issues are relevant to properties passing through estates: (1) RELIEF FOR TRANSFERS IN CONNECTION WITH DIVORCE (Finance Act 2003 s.65): transfers of property between spouses or civil partners made pursuant to a court order on divorce or dissolution of civil partnership are exempt from SDLT. The consideration (including assumed mortgage liability) is treated as nil for SDLT purposes; (2) RELIEF FOR TRANSFERS BETWEEN CONNECTED COMPANIES: not directly relevant to most estate administrations, but where an estate's property is transferred to a company owned by beneficiaries, SDLT is payable on market value — and there may be a 15% flat rate SDLT charge for residential property acquired by a company above £500,000; (3) MIXED USE AND MULTIPLE DWELLINGS RELIEF: where an estate includes a farm with a farmhouse and other dwellings, SDLT reliefs for mixed-use purchases and multiple dwellings relief (abolished from 1 June 2024) may be relevant — take specialist advice; (4) LAND TRANSACTION TAX (LTT) IN WALES: for properties in Wales, Land Transaction Tax (LTT) applies instead of SDLT. LTT is administered by the Welsh Revenue Authority (WRA). The rates and reliefs differ from SDLT. The equivalent additional dwelling surcharge in Wales is 4% (from 22 December 2020); (5) LBTT IN SCOTLAND: for properties in Scotland, Land and Buildings Transaction Tax (LBTT) applies. Administered by Revenue Scotland. The additional dwelling supplement in Scotland is 8% (from 5 April 2024); (6) SDLT RETURN FILING: where SDLT is payable, an SDLT1 return must be filed with HMRC within 14 days of the effective date of the transaction and SDLT must be paid. Late filing and payment attract automatic penalties and interest.