Can you reclaim higher SDLT if your only other property interest was held under a life interest trust?

Introduction

Many people are told they must pay the higher rates of Stamp Duty Land Tax (SDLT) because their name appears on another property. In some cases, that advice is too simplistic. The SDLT surcharge does not apply just because a person is connected with another dwelling in some way. The legal question is whether they held a qualifying “major interest” in that other dwelling at the time of the purchase.

This issue often arises where a person has inherited a future interest in a property, but someone else has the right to live there for life under a will or trust. If the buyer had no present right to occupy the property, no right to income from it, and no real beneficial ownership at the relevant time, there may be grounds to amend the SDLT return and reclaim overpaid tax.

The Question

A buyer purchased a home in March 2023 and paid SDLT at the higher rates because the conveyancer believed the buyer already owned another residential property.

The other property interest arose from a parent’s will many years earlier. Under the will, another adult had the right to live in the property for life or until they chose to leave. The buyer says they had no right to live there, no right to enter freely, and no right to rental income. The buyer’s name had been recorded in connection with the title, apparently to protect a future interest and prevent a sale without the necessary consent.

The buyer was also told they could not qualify for first-time buyer relief. Later, they were told that some SDLT might be reclaimable if the earlier property was sold within three years. The buyer wanted to know whether a refund was available and, if so, on what basis.

Nick’s Explanation

Nick’s central point was that the surcharge question turns on whether the buyer really held a “major interest” in another dwelling when the new home was bought.

In anonymised form, his explanation was:

“If the earlier interest was only a reversionary or future interest under a life interest trust, and the buyer had no present right to occupy the property or receive income from it, there may not have been a qualifying major interest for Schedule 4ZA purposes. If that is right, the higher rates should not have applied in the first place.”

He also explained that the common three-year refund rule is narrower than many people think. It applies where a buyer pays the higher rates on a new purchase and later disposes of a previous main residence. It is not the correct route where the higher rates were wrongly charged from the outset because the buyer did not actually hold another qualifying major interest.

After reviewing the terms of the will, Nick’s view was that:

• the property was held by trustees rather than passing outright to the buyer;
• another person had exclusive rights of occupation;
• the property could not be sold freely while that occupation right continued; and
• the buyer did not appear to have a present beneficial interest amounting to a major interest in a dwelling.

On that basis, he concluded that there was a strong argument that the higher rates were charged in error. He also noted that first-time buyer relief would be a separate question and could fail if the buyer had previously owned a dwelling anywhere in the world.

The Law

The higher rates of SDLT for additional dwellings are contained in Schedule 4ZA to the Finance Act 2003. Broadly, the surcharge applies 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.

For these purposes, the concept of a “major interest” is critical. Schedule 4ZA contains special rules about what counts and what does not count. In broad terms, a mere future or reversionary interest may fall outside the charge if the buyer does not have present beneficial enjoyment of the dwelling.

Paragraphs 10 and 11 of Schedule 4ZA are particularly important in trust and inherited-property cases. They help determine whether a person is treated as having a major interest in a dwelling where trust arrangements, occupation rights, or other limited interests exist.

First-time buyer relief is governed by Schedule 6ZA to the Finance Act 2003. One of the key conditions is that the buyer must never previously have held a major interest in a dwelling anywhere in the world. So even if a trust interest does not count as a major interest, relief can still be unavailable if the buyer owned another home outright at some earlier point.

Where too much SDLT was paid because the original return was wrong, an amendment or repayment claim may be possible within the statutory time limits. In many cases, that means acting within four years of the effective date of the transaction.

It is also important not to confuse this issue with the “replacement of only or main residence” refund mechanism. That refund is available where the higher rates were correctly paid on purchase, but the buyer then disposes of their former main residence within the permitted period. It does not fix a case where the surcharge should never have applied at all.

If a reader is considering whether a property was “not suitable for use” as a dwelling, that is a separate line of analysis. The threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. A property must be in genuinely serious condition before it will fall outside the dwelling rules on that basis.

Analysis

The correct analysis is usually as follows.

1. Identify exactly what the buyer owned on the purchase date.

   It is not enough to say that the buyer’s name was on the title or that they were mentioned in a will. SDLT looks at the legal substance of the interest held.

2. Check whether the earlier property was subject to a life interest, right of occupation, or trust.

   If another person had the right to live in the property indefinitely or for life, and the buyer could not occupy it or receive income from it, that may point away from the buyer having a present major interest.

3. Distinguish between a present beneficial interest and a future or contingent interest.

   A future right to benefit after someone else’s occupation ends is not necessarily a major interest for Schedule 4ZA purposes. The detail of the will or trust deed matters.

4. Consider who controlled the property.

   If trustees held the property, and the occupier’s consent was needed before any sale, that tends to show the buyer did not have practical ownership or present enjoyment.

5. Ask whether the higher rates were correctly charged at all.

   If the buyer did not hold another qualifying major interest on the purchase date, the surcharge should not have been charged. In that situation, the right remedy is usually to amend the return or make a repayment claim, rather than waiting for a later sale.

6. Consider first-time buyer relief separately.

   Even if the inherited trust interest did not count, first-time buyer relief can still be unavailable if the buyer had previously owned a dwelling in the UK or abroad. That issue depends on the buyer’s full ownership history.

On the facts described here, the strongest point is the surcharge issue rather than first-time buyer relief. The buyer appears to have had, at most, a protected future interest while another person enjoyed the property under the will. If that reading of the documents is correct, there is a credible argument that the buyer did not own another dwelling for higher-rates purposes when the new home was bought.

Outcome

The practical conclusion is that a buyer in this type of situation may be able to reclaim the SDLT surcharge without waiting for the earlier property to be sold.

The key question is not whether the buyer was named on title documents or mentioned in a will. The key question is whether, at the purchase date, the buyer held a present “major interest” in another dwelling within Schedule 4ZA Finance Act 2003.

If the earlier interest was only reversionary or contingent under a life interest trust, the higher rates may have been charged in error. However, first-time buyer relief may still be unavailable if the buyer previously owned a dwelling elsewhere.

Practical Steps

If you are assessing a similar case, gather and review the following:

• the will, trust deed, or deed of variation;
• Land Registry title documents;
• any declaration of trust or assent;
• the SDLT return submitted on the later purchase;
• the completion statement showing SDLT paid; and
• evidence of any previous property ownership anywhere in the world if first-time buyer relief is also in issue.

Then work through these questions:

1. Did someone else have a life interest or right to occupy the earlier property?
2. Could you live there, rent it out, or receive income from it?
3. Did trustees, rather than you, control the property?
4. Was your interest only future, contingent, or reversionary?
5. Have you ever previously owned a dwelling outright or held a major interest elsewhere?

If the documents show that the surcharge should not have applied, the next step is usually to prepare an SDLT amendment or repayment claim to HMRC within the applicable time limit. The claim should explain the trust structure clearly and attach the relevant evidence.

Conclusion

Where a buyer’s only connection with another property is a future interest under a will or trust, the SDLT higher rates do not automatically apply. If the buyer had no present right to occupy the dwelling, no right to income, and no present beneficial ownership, there may have been no “major interest” at the time of purchase. In that situation, a refund claim may be available because the surcharge was wrongly charged from the outset.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, paragraphs 10 and 11
• Finance Act 2003, Schedule 6ZA
• 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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