Do you pay higher SDLT if one buyer owns a share in an inherited overseas flat?

Introduction

A common SDLT question arises where a couple are buying a new home, selling their current main residence, and one of them also owns a share in another property abroad. People often want to know whether that overseas property automatically triggers the higher rates for additional dwellings.

The short answer is that an overseas dwelling can count as another property for SDLT purposes. However, that is not the end of the analysis. If the purchase is a genuine replacement of the buyers’ only or main residence, the higher rates may not apply.

The Question

Two joint buyers own their current UK home together and are selling it. They are buying another house which will become their new main residence. One of the buyers also owns a 50% inherited share in a flat overseas with a sibling. That overseas flat is occupied by a family member, produces no rent, and has not been used by that buyer as a home for many years.

The issue is whether the inherited overseas flat counts as an additional dwelling, and if so, whether the buyers can still pay the ordinary residential SDLT rates because they are replacing their main residence.

Nick’s Explanation

Nick’s reasoning was that the overseas flat does count as another dwelling for the purposes of the higher rates rules. The fact that it is abroad, inherited, not let out, and occupied by a relative does not stop it being treated as a dwelling owned by the buyer.

He then explained the key exception: where, on the day of purchase, the buyers have sold their previous only or main residence and the new property is intended to be their new main residence, they are treated as replacing their main residence. In that situation, the additional dwelling surcharge does not apply, even if one buyer owns another property.

In anonymised form, Nick’s conclusion was:

“The overseas flat means one buyer does own another dwelling under the SDLT rules. But because the existing main residence is being sold at the same time as the new home is bought, the replacement of main residence rules should apply, so the purchase should be charged at the normal residential SDLT rates rather than the extra 5%.”

The Law

The higher rates of SDLT for additional dwellings are set out in Schedule 4ZA to the Finance Act 2003.

In broad terms, the surcharge applies if, at the end of the effective date of the transaction, a buyer owns a major interest in another dwelling worth £40,000 or more, and the purchased property is not a replacement for the buyer’s only or main residence.

The main provisions relevant here are:

• Paragraph 3 of Schedule 4ZA, which sets out the basic conditions for the higher rates to apply.
• Paragraph 3(6) of Schedule 4ZA, which deals with replacement of an only or main residence.
• Paragraph 9 of Schedule 4ZA, which disapplies the surcharge where the replacement of main residence conditions are met.
• Paragraph 15(1) of Schedule 4ZA, which makes clear that interests in dwellings outside England and Northern Ireland can still count for these purposes.

For SDLT, overseas dwellings are not ignored simply because they are located abroad. Nor are they ignored merely because they were inherited, are occupied by relatives, or do not produce rental income.

Analysis

The analysis usually works in four steps.

First, ask whether either buyer owns another dwelling at the end of the day of completion. Here, one buyer owns a 50% share in an overseas flat. Assuming that share is a major interest and the dwelling is worth at least £40,000, that condition is met.

Second, ask whether the overseas property counts even though it was inherited and is occupied rent-free by a family member. The answer is yes. The SDLT rules focus on ownership of a dwelling, not on whether it is rented out, occupied by the owner, or producing income.

Third, ask whether the purchase is a replacement of the buyers’ only or main residence. If the buyers dispose of their current main residence and buy a new property intended to become their new main residence, the replacement rules can apply.

Fourth, consider timing. If the sale of the old main residence has already taken place by the end of the day of the new purchase, or takes place on the same day, that usually satisfies the replacement test at the point of purchase. In that case, the higher rates are switched off by paragraph 9 of Schedule 4ZA.

On these facts, the inherited overseas flat is capable of counting as another dwelling. But because the buyers are selling their current main residence and buying a new home to live in as their main residence, they are likely to fall within the replacement of main residence exception. That means the normal residential SDLT rates should apply, not the higher rates for additional dwellings.

The fact that only one of the two buyers owns the overseas flat does not prevent the surcharge rules from being considered, because the test looks at whether any buyer owns another dwelling. But equally, the replacement of main residence rules can still solve the problem if the statutory conditions are met.

Outcome

The practical answer is this:

• The inherited overseas flat is treated as another dwelling for SDLT purposes.
• That would normally bring the higher rates into play.
• However, if the buyers are selling their existing main residence and buying the new property as their replacement main residence at the same time, the replacement of main residence rules should apply.
• In that case, the purchase should be charged at the ordinary residential SDLT rates rather than the additional 5% higher rate.

Practical Steps

Anyone in a similar position should check the following before completion:

• Confirm that the property being sold really has been the buyers’ only or main residence.
• Confirm that the new property is intended to become the buyers’ only or main residence.
• Check the completion timing carefully. The cleanest position is where the old main residence is sold on or before the day the new purchase completes.
• Tell the conveyancer about any overseas property interests, however small or informal they may seem.
• Make sure the SDLT return is completed on the basis of the full facts, including the overseas dwelling and the replacement of main residence position.
• Keep evidence showing occupation of the old home as the main residence and the disposal of that property.

If the sale of the old main residence happens after the new purchase, the position may still be salvageable in some cases by claiming a refund of the higher rates later, but that depends on the statutory timing rules and should be checked carefully.

Conclusion

An inherited share in an overseas flat can count as ownership of another dwelling for SDLT. But where buyers are genuinely selling their current main residence and replacing it with a new one, that other property does not necessarily trigger the higher rates. In a straightforward replacement of main residence case, the ordinary residential SDLT rates should usually apply.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, paragraph 3
• Finance Act 2003, Schedule 4ZA, paragraph 3(6)
• Finance Act 2003, Schedule 4ZA, paragraph 9
• Finance Act 2003, Schedule 4ZA, paragraph 15(1)

This page was last updated on 22 March 2026.

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