Do I Pay SDLT If I Own a Small Inherited Share of a Foreign Property?

Introduction

A common SDLT question is whether a small share in an overseas property counts as owning another dwelling when buying a home in England or Northern Ireland. People often worry that an inherited share abroad means they must pay the higher rates for additional dwellings, or that they cannot describe themselves as a first-time buyer.

The answer depends on the value of the interest already owned, the type of interest, and the price of the property being bought. In the scenario considered here, the inherited foreign share was too small in value to trigger the higher rates, and the purchase price of the new flat was below the standard SDLT threshold in any event.

The Question

A UK resident was buying a flat for £82,500. They had previously inherited a 12.5% share in a flat outside the UK many years earlier. The whole overseas flat was worth about £76,000, so the buyer’s share was worth about £9,500.

The buyer wanted to know:

• whether any SDLT would be payable on the £82,500 purchase;
• whether the inherited foreign share counted as an additional dwelling for SDLT purposes; and
• whether that foreign share needed to be declared, or whether the buyer could simply proceed as a first-time buyer.

Nick’s Explanation

Nick’s answer was that no SDLT would be payable on the purchase as described.

In summary, his reasoning was:

• the purchase price of £82,500 was below the ordinary residential SDLT threshold, so the standard SDLT charge was £0;
• the inherited overseas share did not trigger the higher rates for additional dwellings because the buyer’s interest was worth well below £40,000;
• if the buyer had been living in the UK for many years, the 2% non-resident surcharge should not apply; and
• first-time buyer relief was not needed, because the SDLT due was already nil on the figures given.

Nick also said, in substance, that the overseas share did not need to be treated as an additional property for these SDLT purposes because it was worth less than £40,000.

The Law

SDLT on residential property is charged under the Finance Act 2003. The amount due depends on the chargeable consideration, usually the purchase price, and whether any special rate rules apply.

The higher rates for additional dwellings are set out in Schedule 4ZA to the Finance Act 2003. Broadly, those rules can apply when, at the end of the day of the transaction, the buyer owns more than one dwelling and is not replacing their only or main residence.

For these purposes, an interest in a dwelling is ignored if it is worth less than £40,000. This is an important threshold. It means that a small share in another dwelling, including one outside the UK, may not count at all for the higher rates test if the value of that share is below £40,000.

Overseas dwellings can count for the higher rates rules. The legislation is not limited to UK property. So a foreign property interest must still be considered. However, the same value threshold applies.

The non-resident SDLT surcharge is dealt with separately and depends on the statutory residence test for SDLT purposes. In broad terms, an individual usually needs to have been present in the UK for at least 183 days during the relevant 12-month period to avoid being treated as non-UK resident for this surcharge.

First-time buyer relief is also governed by the Finance Act 2003. A buyer is not a first-time buyer if they have previously acquired a major interest in a dwelling anywhere in the world, including by inheritance. That is a different test from the £40,000 threshold used for the higher rates on additional dwellings.

Analysis

The SDLT position can be worked through in stages.

First, look at the price of the property being bought. The flat was being purchased for £82,500. That is below the standard residential SDLT nil-rate threshold referred to in Nick’s reply. On that basis alone, the ordinary SDLT charge is £0.

Second, ask whether the higher rates for additional dwellings apply. The buyer already owned a 12.5% share in an overseas flat. The whole flat was worth about £76,000, so the buyer’s share was worth about £9,500. Because that interest was worth less than £40,000, it is ignored for the Schedule 4ZA higher rates test. That means the inherited foreign share does not cause the purchase to be treated as an additional dwelling purchase for higher rates purposes.

Third, consider the non-resident surcharge. On the facts given, the buyer had lived in the UK for many years. If the statutory 183-day test is met in the relevant period, the 2% non-resident surcharge does not apply.

Fourth, consider first-time buyer status separately. This is where many people get caught out. A person who has inherited a share in a dwelling can lose first-time buyer status, even if that share is small and even if it is ignored for the higher rates because it is worth less than £40,000. So the buyer should be careful not to assume that “ignored for additional dwelling surcharge” means “still a first-time buyer” in every case.

In this scenario, however, that distinction does not change the SDLT outcome. Even if first-time buyer relief is unavailable because of the inherited overseas interest, the SDLT is still £0 because the purchase price is below the ordinary threshold.

As to whether the foreign share must be declared, the practical answer depends on the SDLT return and the exact questions being asked by the conveyancer or filing software. The key point is that the buyer should not make an inaccurate first-time buyer declaration if they have previously acquired a dwelling interest anywhere in the world. But for the higher rates test, the small inherited share valued below £40,000 is not treated as an additional dwelling.

Outcome

On the facts given, the SDLT payable on the £82,500 purchase is £0.

That is because:

• the purchase price is below the ordinary SDLT threshold; and
• the inherited 12.5% overseas share is worth less than £40,000, so it does not trigger the higher rates for additional dwellings.

The buyer should still take care over any statement that they are a first-time buyer, because previous ownership of a dwelling interest anywhere in the world can affect first-time buyer relief even where the additional dwelling surcharge does not apply.

Practical Steps

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

• work out the current market value of the overseas property;
• calculate the value of your actual share, not the value of the whole property;
• check whether your share is worth at least £40,000 for Schedule 4ZA purposes;
• check whether you have ever previously acquired a major interest in a dwelling anywhere in the world, including by inheritance, before claiming first-time buyer relief;
• confirm your UK residence position for the SDLT non-resident surcharge test; and
• make sure your conveyancer files the SDLT return on the correct basis.

If there is any suggestion that the other property was uninhabitable or not suitable for use as a dwelling, that argument now faces a relatively high threshold following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. A property will not fall outside the dwelling rules merely because it needs repair or modernisation. The condition must be sufficiently serious to meet the stricter approach confirmed in that case.

Conclusion

A small inherited share in a foreign property does not automatically mean SDLT is payable on a UK purchase. If the share is worth less than £40,000, it is generally ignored for the higher rates on additional dwellings. In the example considered here, the buyer’s SDLT was £0. The main point of caution is not to confuse the additional dwelling rules with the separate first-time buyer rules, which use a different test.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 4ZA
• HMRC SDLT Manual, including SDLTM09800
• 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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