Do you pay the SDLT higher rates if you jointly own an overseas property and each share is worth less than £40,000?

Introduction

Buyers often worry about the Stamp Duty Land Tax higher rates when they already own property abroad. A common question is whether the surcharge applies where a married couple or civil partners are buying their first main home in England, but each already owns a small share in an overseas dwelling.

The key issue is whether each buyer holds a relevant major interest in another dwelling worth at least £40,000 at the effective date of the purchase. If each person’s existing interest is worth less than that threshold, the higher rates may not apply.

The Question

A couple are buying a main residence in England together. They also jointly own an overseas apartment, with each holding a 50% share. The total market value of that overseas property is around £60,000 to £70,000, so each individual share is worth less than £40,000. The overseas property is held on a freehold or equivalent absolute title basis, rather than through a long lease structure.

They want to know whether the SDLT higher rates for additional dwellings apply to their English purchase, or whether the overseas property is ignored because each person’s separate interest is below £40,000.

Nick’s Explanation

Nick’s view was that the higher rates should not apply on those facts, provided the valuation is correct and there are no other relevant property interests held anywhere in the world.

In summary, his reasoning was:

• Schedule 4ZA Finance Act 2003 applies the higher rates where a purchaser owns a major interest in another dwelling worth £40,000 or more and is not replacing their only or main residence.
• Paragraph 8 of Schedule 4ZA says that an interest in another dwelling is only relevant if it has a market value of at least £40,000 at the effective date of the transaction.
• For joint purchases, paragraph 2(3) of Schedule 4ZA requires the position to be tested by reference to each purchaser.

As Nick put it in substance, if each buyer’s separate interest in the existing overseas dwelling is below £40,000, and neither buyer has any other relevant dwelling interest worth £40,000 or more, the 5% higher rates surcharge should not apply.

The Law

The higher rates for additional dwellings are contained in Schedule 4ZA to the Finance Act 2003.

In broad terms, the higher rates apply if, at the end of the day of the transaction:

• the purchased property is not subject to one of the statutory exclusions,
• the purchaser has a major interest in another dwelling,
• that other interest has a market value of £40,000 or more, and
• the buyer is not replacing their only or main residence.

Paragraph 8 of Schedule 4ZA is particularly important. It provides that an interest in another dwelling is ignored unless its market value is £40,000 or more at the effective date of the transaction.

Paragraph 2(3) of Schedule 4ZA deals with joint purchasers. The legislation treats the transaction as a higher rates transaction if the conditions are met in relation to any one of the purchasers. That means each purchaser’s existing property interests must be checked individually.

HMRC’s manuals reflect this approach, including:

• SDLTM09764, on joint purchasers and paragraph 2(3) Schedule 4ZA Finance Act 2003
• SDLTM09780, on Condition C and the £40,000 threshold

It is also important to remember that overseas dwellings count. The higher rates rules are not limited to UK property. A dwelling owned abroad can trigger the surcharge if it is a relevant major interest and the value threshold is met.

If a buyer is considering whether a property was so defective that it was 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. That point does not appear to be central to this scenario, but it matters in some SDLT higher rates cases where buyers argue that an existing property was uninhabitable.

Analysis

The rules can be applied in a series of steps.

First, identify whether each buyer owns another dwelling anywhere in the world at the effective date of the English purchase. Here, the answer is yes: each buyer owns a 50% share in an overseas apartment.

Second, ask whether each person’s interest is a major interest. On the facts given, the ownership appears to be freehold or its overseas equivalent, so this is likely to be a major interest for Schedule 4ZA purposes.

Third, value each person’s own interest, not just the whole property. This is where many buyers go wrong. The legislation looks at the purchaser’s interest in the dwelling. If the whole property is worth around £60,000 to £70,000 and each person owns half, each separate share appears to be worth less than £40,000.

Fourth, apply paragraph 8. If each buyer’s own interest is worth less than £40,000 at the effective date, that interest is disregarded for higher rates purposes.

Fifth, check whether either buyer owns any other dwelling interest worth £40,000 or more anywhere in the world. If either does, the higher rates could still apply to the joint purchase.

Sixth, consider any unusual title structure. Nick correctly flagged one technical point: if a person owns only a reversionary freehold subject to a lease with more than 21 years left to run, special rules may affect whether that interest counts. On the stated facts, that does not seem to apply.

Finally, because this is a joint purchase, if the conditions for higher rates are met for any one purchaser, the whole transaction is charged at the higher rates. But if neither purchaser has a relevant major interest worth £40,000 or more, the surcharge should not apply.

On these facts, the overseas apartment should be ignored for higher rates purposes because each separate interest is below the statutory threshold.

Outcome

If the facts are as stated, the SDLT higher rates for additional dwellings should not apply to the purchase.

That conclusion depends on three points being correct:

• each buyer’s own share in the overseas dwelling is genuinely worth less than £40,000 at the effective date,
• neither buyer owns any other dwelling interest worth £40,000 or more anywhere in the world, and
• there is no unusual lease or reversionary structure that changes the analysis.

If those points are satisfied, the existing overseas property should be disregarded under paragraph 8 of Schedule 4ZA Finance Act 2003, so the 5% higher rates surcharge should not be payable.

Practical Steps

Anyone in this position should take the following steps before exchange or completion:

• obtain a reliable open market valuation of the overseas property as at the likely effective date of the purchase,
• calculate the value of each buyer’s separate beneficial interest, not just the value of the whole property,
• check whether either buyer owns any other residential property interests anywhere in the world, however small,
• confirm the legal nature of the overseas title, including whether it is freehold, leasehold, or a reversionary interest,
• give the valuation and ownership evidence to the conveyancer preparing the SDLT return, and
• keep documents showing how the £40,000 threshold was assessed in case HMRC later asks for evidence.

If the valuation is close to the threshold, professional valuation evidence is especially important. SDLT is determined by the facts at the effective date, so the figures should be supportable at that time.

Conclusion

Where joint buyers each own a share in an overseas dwelling, the SDLT higher rates do not apply simply because the property exists. The crucial question is whether each purchaser has a relevant major interest worth at least £40,000. If each separate share is below that threshold, and there are no other relevant property interests, the surcharge should not apply.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, Schedule 4ZA, paragraph 2(3)
• Finance Act 2003, Schedule 4ZA, paragraph 8
• HMRC Stamp Duty Land Tax Manual, SDLTM09764
• HMRC Stamp Duty Land Tax Manual, SDLTM09780
• 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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