Do you pay higher SDLT if you inherited a small share of a foreign property worth under £40,000?

Introduction

People often search for this issue when they are buying their first home in England but already own, or have inherited, a small share in another residential property overseas. The SDLT position can be confusing because two separate questions usually arise:

• does the 5% higher rates surcharge apply because the buyer owns another dwelling; and
• can the buyer still claim First-Time Buyer Relief.

These are different tests. A small inherited share in an overseas home may be ignored for one purpose but still count for the other.

The Question

A UK-resident buyer had inherited a 25% interest in a parent’s home outside the UK. The inherited share was worth about £13,554. The home was occupied by another family member as that person’s residence, and the buyer had not lived there for many years.

The buyer was now purchasing a home in England for £312,500 to use as their only or main residence and wanted to know how much SDLT would be payable.

Nick’s Explanation

Nick’s key point was that the inherited overseas share did not trigger the higher rates surcharge because its value was below the statutory £40,000 threshold.

As he explained, the 5% surcharge does not apply where the interest in the other dwelling is worth less than £40,000 for the purposes of Paragraph 10(2), Schedule 4ZA, Finance Act 2003.

However, he also explained that First-Time Buyer Relief is different. A person is not a first-time buyer if they have previously held a major interest in a dwelling anywhere in the world, even if that interest was inherited and even if it is worth less than £40,000.

On that basis, Nick concluded that:

• the higher rates surcharge should not apply; but
• First-Time Buyer Relief is not available.

He therefore calculated SDLT at the ordinary residential rates, producing a total SDLT bill of £5,625 on a purchase price of £312,500.

Nick also noted that SDLT is a self-assessed tax. In practice, the buyer should make sure their conveyancing solicitor is clearly told about the inherited foreign share and its value so the correct return is filed.

The Law

SDLT on residential property in England is charged under Finance Act 2003. In a case like this, three parts of the legislation matter most.

• Standard residential rates under Finance Act 2003.
• Higher rates for additional dwellings under Schedule 4ZA, Finance Act 2003.
• First-Time Buyer Relief under Schedule 6ZA, Finance Act 2003.

Under Schedule 4ZA, a purchase can be subject to the higher rates surcharge if, at the end of the day of the transaction, the buyer owns a major interest in another dwelling and the other conditions are met. But Paragraph 10(2), Schedule 4ZA provides an important limit: an interest in another dwelling is disregarded if its market value is less than £40,000.

That means a low-value share in another dwelling may fall outside the higher rates rules.

First-Time Buyer Relief works differently. Schedule 6ZA requires the buyer never to have previously acquired a major interest in a dwelling, whether in the UK or anywhere else in the world. There is no matching £40,000 disregard in the first-time buyer rules. So a previous inherited share can prevent relief even where it is too small in value to trigger the surcharge.

Analysis

Applying the rules step by step:

1. The buyer is purchasing a dwelling in England for £312,500.

2. The buyer already owns a 25% share in a dwelling outside the UK, acquired by inheritance.

3. For higher rates purposes, the question is whether that existing interest counts as ownership of another dwelling at or above the relevant threshold. Here, the share is worth about £13,554, which is below £40,000.

4. Because the value is below £40,000, Paragraph 10(2), Schedule 4ZA means that interest is disregarded for the higher rates test.

5. So the 5% higher rates surcharge should not apply.

6. The next question is First-Time Buyer Relief. For that relief, the issue is not whether the inherited share is worth less than £40,000. The issue is whether the buyer has ever previously held a major interest in a dwelling anywhere in the world.

7. An inherited share in a dwelling can count for this purpose. So the buyer is not a first-time buyer within Schedule 6ZA.

8. That means SDLT must be calculated using the ordinary residential rates, not the first-time buyer rates and not the higher rates.

Using the rate bands stated in Nick’s explanation:

• 0% on the first £125,000 = £0
• 2% on the next £125,000 = £2,500
• 5% on the remaining £62,500 = £3,125

Total SDLT: £5,625.

The fact that the overseas property is occupied by a relative, or that the buyer cannot realistically use it as a home, does not change this analysis for these particular rules. The key points are the value threshold for Schedule 4ZA and the prior ownership test in Schedule 6ZA.

Outcome

On these facts, the practical answer is:

• no 5% higher rates SDLT surcharge, because the inherited foreign share is worth less than £40,000;
• no First-Time Buyer Relief, because the buyer has previously held an interest in a dwelling anywhere in the world; and
• SDLT payable at the ordinary residential rates is £5,625 on a purchase price of £312,500.

Practical Steps

If you are in a similar position, it is sensible to:

1. Confirm exactly what interest you own in the other property and how it was acquired.

2. Obtain a reasonable market valuation of your share at the effective date of the English purchase, converted into pounds sterling if the property is overseas.

3. Tell your conveyancing solicitor clearly that you own an inherited share in another dwelling and provide the valuation evidence.

4. Check separately:

   • whether the higher rates rules apply under Schedule 4ZA; and
   • whether First-Time Buyer Relief is blocked under Schedule 6ZA.

5. Review the SDLT return before submission, because SDLT is self-assessed and the buyer remains responsible for the accuracy of the filing.

If a higher rate is paid by mistake, it may be possible to amend the return or submit a refund claim, depending on the circumstances and time limits.

Conclusion

A small inherited share in a foreign home can produce an awkward SDLT result. It may be too low in value to trigger the higher rates surcharge, but it can still prevent First-Time Buyer Relief. In the scenario considered here, that means paying ordinary residential SDLT of £5,625, not the higher rates and not the first-time buyer rates.

Legal References Used

• Finance Act 2003
• Schedule 4ZA, Finance Act 2003
• Paragraph 10(2), Schedule 4ZA, Finance Act 2003
• Schedule 6ZA, Finance Act 2003

This page was last updated on 22 March 2026.

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