Do you pay higher SDLT if you own a share in an overseas holiday home but are replacing your main residence?

Introduction

Many people are surprised to learn that Stamp Duty Land Tax (SDLT) looks at residential property ownership worldwide, not just in the UK. That can cause concern where someone owns a small share in an overseas holiday home and is also moving house in England.

The key question is usually whether the purchase counts as an additional dwelling, which can trigger the higher SDLT rates, or whether it qualifies as a replacement of the buyer’s only or main residence. That distinction is often decisive.

The Question

A homeowner in the UK also owns a one-third share in a holiday property abroad with family members. They plan to sell their current UK home and buy a new home in England. Their current UK property is clearly where they normally live: it is the family home, they work in the UK, their children are educated here, and their ordinary day-to-day life is based here.

They want to know whether the higher SDLT rates apply because of their share in the overseas holiday home, or whether the purchase of the new English home is treated as a replacement of their main residence so that the ordinary residential SDLT rates apply instead.

Nick’s Explanation

Nick’s explanation was that the overseas share does count in principle. Under Schedule 4ZA to the Finance Act 2003, the higher SDLT rates can apply if, at the end of the day of completion, the buyer owns more than one dwelling worth more than £40,000 anywhere in the world.

He explained that a fractional share in an overseas holiday home is still capable of being an “interest in a dwelling” for these purposes. So the fact that the ownership is only one-third, and the property is outside the UK, does not by itself prevent the higher rates from applying.

However, he also identified the main residence replacement exception. In substance, his view was:

• if the buyer disposes of their old main residence before completing the purchase of the new home, the higher rates should not apply at all; and
• if the buyer still owns the old main residence on the day they complete the new purchase, the higher rates may apply initially, but a refund may be available if the old main residence is disposed of within the permitted time limit.

He further noted that, on the facts described, the UK home was clearly the buyer’s main residence.

The Law

The higher rates of SDLT for additional dwellings are contained in Schedule 4ZA to the Finance Act 2003. Broadly, the surcharge applies where, at the end of the effective date of the transaction, the buyer:

• is purchasing a major interest in a dwelling;
• the consideration is £40,000 or more; and
• owns an interest in another dwelling worth £40,000 or more.

For these purposes, overseas dwellings are relevant. SDLT does not ignore foreign residential property when deciding whether a buyer owns more than one dwelling.

A share in another property can also count. The legislation is concerned with whether the buyer holds a major interest in another dwelling, not whether they own the whole of it outright.

The important exception is where the new purchase is a replacement of the buyer’s only or main residence. In broad terms, where a buyer buys a new main home and has disposed of their previous only or main residence within the statutory period, the higher rates do not apply, or can be reclaimed if paid first.

Analysis

The analysis usually works in four stages.

First, ask whether the buyer owns another dwelling at the end of completion day. Here, the answer is yes, because the buyer owns a one-third share in an overseas holiday property. Assuming that share is worth at least £40,000, it is relevant for Schedule 4ZA.

Second, ask whether the property being bought is a dwelling and whether the price is high enough for SDLT to be in point. On the facts given, the new English property plainly falls within the SDLT regime.

Third, ask whether the current UK home is the buyer’s only or main residence. That is a factual question. Relevant indicators include where the buyer actually lives, works, keeps their family life, and conducts their normal domestic life. On these facts, the UK home is strongly identifiable as the main residence.

Fourth, ask whether the purchase of the new home is a replacement of that main residence. If the old main residence is sold before or on the purchase of the new one, the replacement condition is normally met immediately. If the old main residence is sold after the new purchase, the higher rates may be charged first, but a refund may be claimed if the former main residence is disposed of within the statutory time limit.

So the overseas holiday home does not stop the buyer obtaining main residence replacement treatment. It simply means the buyer must satisfy the replacement rules properly.

This is not an “uninhabitable” case, but it is worth noting that where buyers argue that a property should be ignored because it is not suitable for use as a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. Ordinary disrepair or inconvenience will not usually be enough.

Outcome

If the buyer sells their existing UK main residence before completing the purchase of the new home, they should generally pay SDLT at the ordinary residential rates only, despite owning a share in the overseas holiday home.

If they complete on the new home before selling the old main residence, the higher rates will usually be payable at first. But if they then dispose of the former main residence within the relevant three-year period, they should generally be able to claim a refund of the surcharge.

Practical Steps

• Confirm whether the overseas property interest is worth more than £40,000. In many cases it will be.
• Check the timing of the sale of the existing main residence against the purchase date of the new home.
• Keep clear evidence that the old UK property was your only or main residence, such as occupation history and other ordinary residence indicators.
• If the old main residence is sold before the new purchase completes, ensure the SDLT return is prepared on the basis that the replacement exception applies.
• If the new purchase completes first, budget for the higher rates initially and then make a refund claim once the previous main residence is sold within the permitted period.
• Make sure the SDLT filing position reflects the facts accurately, especially where there is foreign property ownership.

Conclusion

Owning a share in an overseas holiday home can bring the higher SDLT rules into play, because worldwide property ownership counts. But where a buyer is genuinely replacing their main residence, that usually prevents the surcharge from applying, or allows it to be reclaimed later if the old home is sold within time.

Legal References Used

• 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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