Did I overpay SDLT on a buy-to-let first purchase and later buying out a sibling’s share of an inherited home?

Introduction

People often ask whether they paid too much Stamp Duty Land Tax (SDLT) when they bought a first property as an investment and later bought out a co-owner’s share in the home they live in. These situations can be confusing because SDLT depends on several separate rules, including whether the buyer already owned a dwelling, whether the purchase was of a main residence, and whether the higher rates for additional dwellings applied.

This article explains how those rules work in a common scenario: a person first buys a buy-to-let property in their own name, then later inherits a share in the home they occupy and pays a sibling for the remaining share.

The Question

The scenario can be stated in general terms as follows:

A buyer purchased a first property for £312,000 using a buy-to-let mortgage. It was bought in the buyer’s own name and was intended to be let to tenants, not occupied as the buyer’s home. SDLT of £5,600 was paid.

Later, after a parent’s death, the buyer inherited a 50% share in the home they were already living in. A sibling inherited the other 50%. The buyer then paid £250,000 to acquire the sibling’s half share so that they could remain living in the property. SDLT of £7,500 was paid on that later transaction.

The question is whether the SDLT figures were correct, and whether any overpayment may have arisen.

Nick’s Explanation

Nick’s key point on the first purchase was that the SDLT figure paid did not appear to match the usual outcomes. In anonymised form, his reasoning was:

“There are three scenarios that could have a bearing on the stamp duty calculations: if you were a first-time buyer and bought in your own name, £0; if you were not a first-time buyer and bought in your own name, £3,100; if you bought through a limited company, £12,460. The £5,600 paid does not correlate with those figures.”

On the second property, Nick’s view was that the inherited 50% share was not itself chargeable to SDLT, but the later payment to acquire the sibling’s 50% share was chargeable consideration. Because the buyer already owned another dwelling at that point, the 3% higher rates for additional dwellings applied to the £250,000 paid, producing SDLT of £7,500.

That broad analysis is consistent with the usual SDLT treatment, subject to checking the exact facts and the effective dates of the transactions.

The Law

SDLT is charged under the Finance Act 2003 on land transactions involving chargeable consideration.

The main rules relevant here are:

• SDLT is generally charged on the consideration given for a land transaction.
• An inheritance on death is not normally a land transaction for SDLT purposes, because the beneficiary does not give chargeable consideration merely by inheriting.
• If a person later pays to acquire another beneficiary’s share, SDLT can apply to the amount paid.
• The higher rates for additional dwellings in Schedule 4ZA Finance Act 2003 can apply where, at the end of the day of the transaction, the buyer owns an interest in another dwelling and the replacement of only or main residence rules do not disapply the surcharge.
• First-time buyer relief only applies where the purchaser intends to occupy the property as their only or main residence. It does not apply to a buy-to-let purchase.

Where a property is said to be uninhabitable or not suitable for use as a dwelling, that argument now faces a relatively high threshold following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Ordinary disrepair, even if expensive to fix, will not necessarily prevent a building from counting as a dwelling for SDLT purposes.

Analysis

It helps to look at each transaction separately.

First purchase: buy-to-let property for £312,000

If the property was bought in the buyer’s own name and this was the first property interest ever acquired, the buyer may still have been a first-time buyer in the ordinary sense, but that does not automatically mean first-time buyer relief applied. For SDLT, first-time buyer relief is limited to purchases intended to be occupied as the buyer’s only or main residence. A buy-to-let purchase does not qualify for that relief.

So the likely comparison is between:

• ordinary residential SDLT rates, if no higher-rate surcharge applied; and
• higher residential rates, if the purchase fell within Schedule 4ZA.

On the facts given, the buyer did not already own another dwelling at the time of the buy-to-let purchase. Living in a parent’s home without owning a chargeable interest in it does not by itself make the buyer an additional dwelling owner for SDLT purposes. That suggests the 3% higher rates should not have applied to the first purchase.

On a £312,000 residential purchase at ordinary rates in force at that time, SDLT of £3,100 is the figure Nick identified. That is because:

• 0% on the first £250,000 = £0
• 5% on the next £62,000 = £3,100

That means a payment of £5,600 does not obviously fit the standard calculation if the property was bought personally and the buyer owned no other dwelling at completion.

It would be necessary to check whether anything unusual affected the filing, such as:

• an SDLT return completed on the basis that the higher rates applied;
• an error in the return;
• the purchase being made by a company rather than an individual; or
• some other fact not mentioned in the summary.

Second purchase: paying £250,000 to buy out a sibling’s 50% share in the home

The inherited 50% share passing on death is not normally subject to SDLT because there is no chargeable consideration merely for inheriting.

However, the later acquisition of the sibling’s share for £250,000 is a separate land transaction. SDLT is calculated on the £250,000 paid for that share.

At that point, the buyer still owned the earlier buy-to-let property. That means they owned another dwelling at the end of the day of the transaction. The question then becomes whether the purchase of the sibling’s share counted as a replacement of the buyer’s only or main residence, which could switch off the higher rates.

Usually, replacing a main residence requires disposing of a previous only or main residence and acquiring a new one. In this kind of case, the buyer did not dispose of an old main residence. Instead, they increased their ownership in the same home while still retaining the buy-to-let property. In those circumstances, the higher rates can apply.

On £250,000, the 3% higher rate produces SDLT of £7,500. That matches the amount paid and is consistent with Nick’s explanation.

Condition of the home

The fact that the home needed a new roof and had leaks does not, by itself, mean it was not a dwelling for SDLT purposes. The courts now apply a relatively high threshold in uninhabitable cases following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. A property can still be treated as residential even if it needs major works. On the facts described, the roof issue does not obviously change the SDLT treatment.

Outcome

On the facts provided, the likely position is:

• The SDLT paid on the later £250,000 buyout of the sibling’s share was likely correct at £7,500, because the 3% higher rates for additional dwellings appear to have applied.
• The SDLT paid on the earlier £312,000 buy-to-let purchase may have been too high if the property was bought personally and the buyer owned no other dwelling at that time. On the information given, the expected SDLT appears to be £3,100 rather than £5,600.

Practical Steps

If you are reviewing a similar case, the main steps are:

1. Check who bought the first property: individual or company.
2. Check whether the buyer owned any legal or beneficial interest in any dwelling at the effective date of the first purchase.
3. Obtain the SDLT5 certificate and the SDLT return for the first purchase to see which rates were applied.
4. Confirm whether any surcharge box or multiple dwellings issue was wrongly entered on the return.
5. For the later buyout, confirm the amount actually paid for the co-owner’s share and whether the buyer still owned the earlier property at completion.
6. Do not assume that serious disrepair removes SDLT liability; the threshold for “not suitable for use as a dwelling” is now relatively high after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
7. If the first return appears wrong, consider whether an SDLT amendment or repayment claim is still possible within the applicable time limits.

Conclusion

In a case like this, the later SDLT charge on buying out a sibling’s share of an inherited home is often correct where the buyer already owns a separate buy-to-let property. The stronger query is usually the earlier buy-to-let purchase: if it was bought in the buyer’s own name and no other dwelling was owned at the time, the SDLT paid may have exceeded the amount normally due.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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