Do I pay higher SDLT if I own a derelict property abroad worth less than £40,000?

Introduction

Buyers often ask whether owning a property outside the UK will trigger the higher rates of Stamp Duty Land Tax (SDLT) when they buy a home in England or Northern Ireland. This question comes up regularly where the overseas property is derelict, hard to use, or of very low value.

The answer depends on the SDLT rules in Finance Act 2003, especially the tests for an “additional dwelling” and the separate rules for first-time buyer relief. A property abroad can count for SDLT purposes, but a key exception applies where the interest is worth less than £40,000.

The Question

A married couple are buying a residential property in the UK. One or both of them already own an overseas property. That overseas property is in very poor condition, with no proper bathroom or kitchen and serious structural issues. It appears to be derelict and was bought some years ago for the equivalent of about €15,000. The buyer wants to know:

• whether the overseas property means the UK purchase will be charged at the higher SDLT rates for additional dwellings; and
• whether they can still qualify as first-time buyers in the UK.

Nick’s Explanation

Nick’s core view was straightforward. He explained that if a property is worth less than £40,000, it is not treated as an additional property for the higher rates, wherever in the world it is located.

In anonymised form, his explanation was:

“If a property is valued at less than £40,000, regardless of its location in the world, it is not regarded as an additional property.”

Once told that the overseas property had been bought for around €15,000 and was not thought to be worth £40,000, Nick concluded:

“In that case, you do not need to declare this as an additional property.”

He also made an important separate point about first-time buyer relief:

“If you have an interest in a property anywhere in the world, you would not qualify as a first-time buyer.”

That distinction matters. A person can escape the higher rates because the overseas property is below the £40,000 threshold, but still fail the first-time buyer test because they have previously owned a major interest in a dwelling anywhere in the world.

The Law

The higher rates for additional dwellings are contained in Schedule 4ZA to the Finance Act 2003.

Under paragraph 3 of Schedule 4ZA, a purchase can be a higher rates transaction if, at the end of the day of purchase, the buyer has a major interest in another dwelling and the relevant conditions are met.

One of the key limits is the £40,000 threshold. Broadly, an interest only counts for these purposes if the dwelling has a market value of £40,000 or more. For overseas property, paragraph 17(2)(a) confirms that references to a “major interest” are read as meaning the equivalent interest under the law of that country.

So, an overseas dwelling can count. But if the buyer’s interest in it is worth less than £40,000, it will generally not count as an additional dwelling for the higher rates.

First-time buyer relief is dealt with separately in Schedule 6ZA to the Finance Act 2003. The relief is only available if the buyer has never previously held a major interest in a dwelling, whether in the UK or anywhere else in the world. There is no matching £40,000 exception in the ordinary first-time buyer test. Previous ownership abroad can therefore prevent relief even where that property does not trigger the higher rates.

Where a buyer argues that a building was not suitable for use as a dwelling, the condition threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That case makes clear that “unsuitable for use” arguments are not easily made out. Serious disrepair does not automatically stop a property being treated as a dwelling.

Analysis

There are really two separate SDLT questions here.

First, does the overseas property trigger the higher rates for additional dwellings?

To answer that, you look at whether the buyer owns an interest in another dwelling at the end of the transaction and whether that interest is worth at least £40,000. If the overseas property is genuinely worth less than £40,000, it should not count as an additional dwelling for Schedule 4ZA purposes. On the facts given, a purchase price of around €15,000 some years ago, combined with severe disrepair, strongly suggests the value may well be below that threshold. If so, the higher rates should not apply on that basis.

Second, can the buyers claim first-time buyer relief?

This is a different test. For first-time buyer relief, previous ownership of a dwelling anywhere in the world is usually enough to disqualify the buyer. It does not matter that the property is abroad. It does not usually matter that it is worth less than £40,000. And it does not automatically help that the building is in poor condition.

That means a buyer can be in the following position:

• not liable to the higher rates because the overseas property is worth less than £40,000; but
• still not eligible for first-time buyer relief because they have already owned a dwelling interest somewhere in the world.

What about the fact that the overseas property is derelict?

That point needs care. Some buyers assume that if a property has no kitchen, no bathroom, or serious defects, it cannot count as a dwelling. But the law in this area is restrictive. Following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the threshold for showing that a property is not suitable for use as a dwelling is relatively high. Unless the condition is extreme and the evidence is strong, HMRC may still treat the building as a dwelling. In this scenario, the safer and simpler argument is the valuation point: if the overseas property is worth under £40,000, it should not count for the higher rates anyway.

Outcome

If the overseas property is worth less than £40,000, it should not count as an additional dwelling for the SDLT higher rates under Schedule 4ZA Finance Act 2003, even though it is outside the UK.

However, ownership of that overseas property is still likely to prevent first-time buyer relief under Schedule 6ZA, because the first-time buyer rules look at whether the buyer has ever previously owned a dwelling interest anywhere in the world.

Practical Steps

If you are in this position, the sensible next steps are:

• obtain evidence of the current market value of the overseas property, ideally from a local professional valuer or other reliable valuation evidence;
• check exactly who owns the overseas property and what legal interest each buyer holds in it;
• separate the higher rates question from the first-time buyer relief question, because the tests are different;
• do not rely too quickly on an argument that the property is “not suitable for use as a dwelling”, because that threshold is now relatively high after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799;
• give your conveyancer clear written information about the overseas property, including value, ownership and condition; and
• ask for the SDLT return to reflect the correct position based on the legislation and supporting evidence.

Conclusion

An overseas property can affect SDLT in England and Northern Ireland, but a property worth less than £40,000 will generally not count as an additional dwelling for the higher rates. That does not mean the buyer is a first-time buyer. Previous ownership of a dwelling anywhere in the world will usually block first-time buyer relief, even where the overseas property is low-value or derelict.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, paragraph 3
• Finance Act 2003, Schedule 4ZA, paragraph 17(2)(a)
• Finance Act 2003, Schedule 6ZA
• Finance Act 2003, Schedule 6ZA, Part 3, first-time buyer provisions
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

See all questions and answers categorized in this sitemap. Or use Google site search below.