Stamp Duty on Inherited Property: What You Need to Know

Stamp duty and inherited property is one of the most frequently misunderstood areas of estate administration. Many people are surprised to learn that while they pay no stamp duty on the inheritance itself, the inherited property can still affect the amount of stamp duty they pay when making a future property purchase. Understanding the rules — and the relief available — can save significant amounts of money.

No SDLT When You Inherit a Property

Stamp Duty Land Tax is a tax on property transactions — specifically, on the purchase or acquisition of property. Inheriting a property is not a purchase; it is a transfer by operation of law following a death. As a result, no SDLT is payable by the beneficiary at the point of inheriting.

This applies whether you inherit under a will, under the intestacy rules, or as the surviving joint tenant of a jointly owned property. No SDLT return needs to be filed with HMRC in connection with the inheritance itself.

Inheriting a Property Counts as Owning One for SDLT Purposes

Here is where the complexity arises. Since April 2016, buyers who already own a residential property — whether in the UK or abroad — must pay an additional 3% SDLT surcharge (called the higher rates for additional dwellings, or HRAD) on any further residential property they purchase.

An inherited property counts as a property you own for HRAD purposes. This means that if you inherit a property and then want to buy another one — or if you already own your own home and then inherit a property — subsequent property purchases will be subject to the 3% surcharge on top of normal SDLT rates.

For example, if you inherit a flat and then want to buy a house worth £400,000 as your main home, the SDLT calculation would be:

• Standard SDLT on £400,000: approximately £10,000
• 3% HRAD surcharge on £400,000: £12,000
• Total SDLT payable: approximately £22,000

This is a substantial additional cost, and it catches many people off guard.

The 36-Month Replacement Window: Reclaiming the 3% Surcharge

There is an important relief available that allows you to reclaim the 3% surcharge in certain circumstances. If you buy a new property (paying the 3% HRAD surcharge because you own an inherited property) and then sell the inherited property within 36 months of the date of the new purchase, you can claim a refund of the 3% surcharge from HMRC.

This relief is designed for situations where someone is replacing their main residence — but in practice, it can also apply where the disposal of the inherited property happens within the window. The key conditions are:

• The inherited property must be sold or otherwise disposed of (gifted, transferred, etc.) within 36 months of the date you completed your new purchase
• You must make the refund claim to HMRC within 12 months of selling the inherited property (or 12 months of the filing date of your SDLT return, if later)
• The refund claim is made using a paper SDLT return (form SDLT1 amendment) or online

This means that even if you pay the 3% surcharge upfront when buying your new home, you may be able to recover it if you sell the inherited property within the three-year window. This should factor into your planning — for instance, making selling the inherited property a priority if you want to recover the surcharge.

Buying the Inherited Property from the Estate

A common question arises where one beneficiary wants to buy out other beneficiaries and keep the inherited property themselves — for example, a child buying out their siblings to keep the family home.

Where a beneficiary acquires property from the estate (rather than inheriting it directly), this is treated as a purchase for SDLT purposes. However, SDLT is generally calculated only on the amount paid to the other beneficiaries (the consideration), not the full market value.

If the property is simply assented to the beneficiary — that is, transferred to them as their inheritance without any purchase price being paid — no SDLT is payable.

Where the transaction is more complex (for example, a beneficiary pays a sum to other beneficiaries in exchange for a larger share), it is important to take advice from a solicitor to ensure the SDLT position is correctly assessed.

Scotland and Wales: Equivalent Taxes

The rules described above apply to England and Northern Ireland, where SDLT applies. Scotland and Wales have their own land transaction taxes, with broadly similar (but not identical) rules:

Scotland — Land and Buildings Transaction Tax (LBTT): Administered by Revenue Scotland, LBTT applies to property transactions in Scotland. It has an Additional Dwelling Supplement (ADS) of 6% (as of April 2024) on purchases of additional residential properties. Inherited properties count as owned properties for ADS purposes. The rules around replacement transactions and reclaims broadly mirror the SDLT rules but have differences in detail — consult Revenue Scotland guidance at revenue.scot.

Wales — Land Transaction Tax (LTT): Administered by the Welsh Revenue Authority, LTT applies to property transactions in Wales. It has a Higher Rates surcharge of 4% on additional residential dwellings (as of 2024). Again, inherited properties count as owned properties for higher rates purposes. Replacement home relief is available in similar circumstances. Guidance is available at wtax.gov.wales.