Do you pay higher SDLT if you own a small share in an overseas property worth less than £40,000?

Introduction

A common SDLT question arises where a buyer is purchasing their first home in the UK but already owns, or partly owns, a property abroad. People often want to know whether that overseas interest means they must pay the higher rates for additional dwellings.

The answer often turns on two points:

• whether the overseas asset counts as a dwelling interest for SDLT purposes, and
• whether the buyer’s interest in that dwelling is worth at least £40,000 at the effective date of the UK purchase.

There can also be a separate question about first-time buyer relief, especially where the overseas interest is not a full beneficial ownership but a more limited form of title, such as bare ownership subject to another person’s lifetime right to occupy and use the property.

The Question

A buyer living in the UK is planning to purchase a main residence here with their partner. Before moving to the UK, the buyer was given a half share in a flat overseas. The overseas property was not bought by the buyer, but transferred within the family. The buyer believes their share may be worth less than £40,000.

The buyer wants to know:

• whether that overseas interest triggers the higher SDLT rates for additional dwellings;
• what evidence would be needed to show the value is below £40,000;
• whether anything needs to be filed with the SDLT return at the time of purchase; and
• whether the position changes if the buyer only has bare ownership because another family member has retained a lifetime right of use and enjoyment of the property.

Nick’s Explanation

Nick’s key point was that the higher rates surcharge is now 5%, not 3%.

He also explained the practical effect of the £40,000 threshold: if the buyer’s 50% ownership interest in the overseas property is worth less than £40,000, that interest is not treated as a relevant additional dwelling interest for the higher rates test.

In anonymised form, his explanation was:

“If your 50% ownership of the property is valued at less than £40,000, it’s not considered an additional property. If you are unsure about the valuation, it may be worth asking a local valuer to provide an estimate.”

He also raised a further issue where the buyer’s ownership may be only a limited or bare ownership interest, because another person has a retained right to use the property for life. In that type of case, the question is not only value, but whether the buyer has a “major interest” or a chargeable beneficial interest at all.

The Law

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

In broad terms, the surcharge can apply where, at the end of the day of the transaction, the buyer owns a major interest in another dwelling and that other dwelling has a market value of £40,000 or more.

The £40,000 threshold is important. A dwelling interest below that level is generally ignored for the purposes of the higher rates test.

Where the existing property is overseas, it can still count. SDLT looks at residential property ownership anywhere in the world, not just in the UK.

Another relevant provision is section 48 of the Finance Act 2003, which deals with the meaning of a “chargeable interest”. Whether a person has a relevant property interest for SDLT depends on the legal nature of their rights. A person with only a very limited title, or with no present right to occupy, benefit from, or control the property, may not always be treated in the same way as a full beneficial owner.

For first-time buyer relief, the rules are strict. A buyer will not qualify if they have previously held a major interest in a dwelling anywhere in the world. That issue is separate from the higher-rates question. A person may fail first-time buyer relief even if they do not have to pay the higher rates surcharge, depending on the exact nature of the overseas interest.

If a case involves arguments that a property was uninhabitable or 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 authority makes it harder to argue that a property falls outside the dwelling rules merely because it has defects or requires work.

Analysis

The SDLT analysis usually works in stages.

First, identify what the buyer owns overseas. If the buyer has a half share in a flat, that can potentially count as ownership of another dwelling for Schedule 4ZA purposes, even though it is outside the UK.

Second, value the buyer’s own interest, not just the whole property. If the whole overseas property is worth, for example, £70,000, a 50% share may be worth about £35,000. If the buyer’s actual interest is worth less than £40,000, the higher rates test may not be met.

Third, consider whether the buyer’s rights are reduced by a retained lifetime right of use in favour of another person. That can matter a great deal. If another person has the right to occupy the property, receive the income from it, and exclude the legal owners from enjoying it during that person’s lifetime, the market value of the buyer’s bare ownership may be much lower than a simple half share of the vacant property value.

Fourth, ask whether the buyer’s interest is truly a major beneficial interest at all. This is the more technical point. If the buyer merely holds a bare or reversionary title while another person has the full present right to use and benefit from the property, there may be an argument that the buyer does not hold the kind of present beneficial interest that counts in the way HMRC would usually expect. That depends heavily on the foreign law documents and on how the overseas rights translate into UK SDLT concepts.

Fifth, keep the higher-rates issue separate from first-time buyer relief. These are related but different tests. Even if the buyer’s overseas interest is worth less than £40,000 and so does not trigger the 5% surcharge, that does not automatically mean first-time buyer relief is available. For that relief, the question is whether the buyer has previously acquired a major interest in a dwelling anywhere in the world. A bare ownership or usufruct structure may create room for argument, but it needs careful analysis of the foreign deed and rights created.

Sixth, there is usually no requirement to send valuation evidence or foreign title documents with the SDLT return as a matter of routine. SDLT is largely self-assessed. The buyer’s conveyancer will complete the SDLT return based on the information provided. However, the buyer should keep supporting evidence in case HMRC later opens an enquiry.

On the specific question of whether an undefined co-ownership share would normally be treated as 50/50, the general practical assumption is that where two co-owners are named and no different proportions are stated, equal shares are usually inferred. But that is ultimately a question of the governing foreign law and the wording of the deed.

As for transferring the overseas interest before the UK purchase, that may change the SDLT position, but it is not something to do casually. The legal effect, timing, valuation, and any tax or succession consequences in the foreign jurisdiction all matter. It also would not necessarily restore first-time buyer relief if the buyer has already previously held a major interest.

Outcome

If the buyer’s existing overseas interest is genuinely worth less than £40,000 at the time of the UK purchase, that interest will generally be ignored for the higher rates of SDLT. In that situation, the 5% surcharge should not apply.

If the buyer only holds bare ownership while another person has a lifetime right to use and benefit from the property, that may further support the conclusion that the buyer’s interest is either worth less than £40,000 or may not amount to the relevant kind of beneficial property interest. But that point is more technical and depends on the foreign legal documents.

First-time buyer relief is a separate and more difficult question. The existence of any earlier overseas dwelling interest may prevent relief unless, on proper analysis, the buyer never previously held a major interest for SDLT purposes.

Practical Steps

A buyer in this position should usually gather the following before exchange or completion:

• a copy of the overseas title deed or transfer document;
• a certified translation if the document is not in English;
• evidence of the legal effect of any retained right of use, usufruct, life interest, or similar right under the foreign law;
• an open market valuation of the whole overseas property from a suitably qualified local valuer;
• if possible, a valuation of the buyer’s actual interest, taking account of co-ownership and any lifetime right of use;
• evidence showing how co-ownership shares are determined under the foreign law if the deed does not state percentages.

It is also sensible to ask the conveyancer to record the SDLT analysis on file, including:

• whether the overseas interest is being treated as below £40,000;
• what valuation date has been used;
• whether the buyer is claiming that the foreign interest is only bare ownership or otherwise not a major beneficial interest; and
• whether first-time buyer relief is being claimed or not claimed, and why.

Although documents are not normally filed with the SDLT return, they should be retained in case HMRC asks for them later.

Conclusion

Owning a share in an overseas property does not automatically mean the higher SDLT rates apply. If the buyer’s interest is worth less than £40,000, the surcharge will usually not be due. Where the buyer only has bare ownership and another person holds a lifetime right of use, the position may be even stronger, but that needs careful review of the foreign legal rights. The higher-rates test and first-time buyer relief test should always be analysed separately.

Legal References Used

• Finance Act 2003, Schedule 4ZA
• Finance Act 2003, section 48
• HMRC Stamp Duty Land Tax Manual, including SDLTM29855
• 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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