Guidance on LBTT Exemption for Changing Will Beneficiary Without Compensation

LBTT exemption for post-death changes to who inherits property

A transfer of property after death can be exempt from Land and Buildings Transaction Tax if a will or intestacy is varied within two years so that a different beneficiary receives the property, provided the new beneficiary does not give compensation for that change. The main issue is whether the arrangement is simply a redistribution of the estate or whether the new beneficiary is effectively paying for the property.

• The exemption applies where property originally passes under a will or intestacy and is later redirected to a different beneficiary.
• The variation must be made within two years of the deceased’s death.
• The exemption is only available if the new beneficiary gives no compensation in return for receiving the property.
• Compensation can include cash or taking on a mortgage or other secured debt linked to the property.
• If the original beneficiary simply receives different assets from the estate instead, that is not normally treated as compensation.
• The key practical question is whether the arrangement is a genuine estate variation or a buyout between beneficiaries.

Scroll down for the full analysis.

LBTT exemption where a will or intestacy is varied so a different beneficiary receives property

This page explains a specific LBTT exemption that can apply after someone dies. It covers cases where, within two years of death, the people entitled under a will or intestacy rearrange matters so that land or property goes to a different beneficiary. If the new beneficiary does not give compensation for that change, the transaction can be exempt from Land and Buildings Transaction Tax.

What this rule is about

When a person dies, land may pass under their will or under the intestacy rules if there is no valid will. Sometimes the beneficiaries later agree to change who should receive a property. In practice, this may happen for family, practical, or tax reasons.

Normally, a transfer of land can raise LBTT issues. The rule dealt with here creates an exemption for certain post-death rearrangements. Its purpose is to prevent LBTT being charged where the beneficial entitlement is simply being redirected after death, rather than the property being bought in the ordinary sense.

What the official source says

The official guidance says the exemption applies where:

• the transaction changes the terms of a will or intestacy,
• the change is made within two years of the person’s death, and
• as a result, a different beneficiary receives the property.

The exemption is only available if the new beneficiary does not make a compensation payment.

The guidance says that compensation includes taking on liability for a mortgage. That is important because a person may think they have paid nothing in cash, but if they assume secured debt on the property, that can still count as compensation.

The guidance also makes clear that not everything given in return counts as compensation. A variation in favour of the original beneficiary does not count as a compensation payment. The example given is where the original beneficiary receives something else instead of the property.

The source refers both to the exemption provision and to the wider rules on chargeable consideration. That matters because whether anything is being given in return is central to whether the exemption is available.

What this means in practice

The practical question is whether the rearrangement is a genuine variation of the deceased’s estate, made within the two-year period, without the new recipient paying for the property.

If those conditions are met, the land transaction is exempt from LBTT.

If the new beneficiary gives compensation, the exemption may be lost. The most obvious example is a cash payment, but the guidance specifically warns that taking over a mortgage can also amount to compensation.

This means that a family agreement can fall on either side of the line depending on how it is structured:

• If one beneficiary simply gives up a property entitlement and receives some other part of the estate instead, that can still fall within the exemption.
• If the person receiving the property pays money, or takes on mortgage debt as part of the arrangement, the exemption may not apply.

For conveyancers and personal representatives, the key practical point is that the tax result depends not just on the fact that the will or intestacy was varied, but also on whether anything amounting to consideration moved from the new beneficiary.

How to analyse it

A sensible way to analyse the issue is to ask the following questions:

• Did the property originally pass under a will or intestacy?
• Has there been a change to those arrangements so that a different beneficiary will receive the property?
• Was that change made within two years of the death?
• Has the new beneficiary given any compensation for receiving the property?
• Does that compensation include assuming liability for a mortgage or other secured borrowing?
• Is the original beneficiary simply receiving a different benefit from the estate instead, rather than being paid by the new beneficiary?

The distinction between compensation and a mere rearrangement of estate entitlements is the central issue. The guidance indicates that replacing one benefit with another within the estate is not, by itself, treated as compensation in this context.

Example

A dies leaving a house to B under a will. Within two years of A’s death, the family agrees to vary the will so that the house goes instead to C. In return, B receives other assets from the estate. If C does not pay B and does not take on mortgage liability as compensation for receiving the house, the transfer can fall within the LBTT exemption.

By contrast, if C receives the house and agrees to take over the mortgage secured on it, the guidance indicates that this assumption of liability counts as compensation. In that case, the exemption may not be available.

Why this can be difficult in practice

The main difficulty is working out whether the new beneficiary has really given compensation.

Some arrangements look informal or family-based, but still involve value moving from the new beneficiary to the original beneficiary. Cash is the clearest example, but debt assumption can be less obvious and is specifically identified in the guidance as compensation.

Another point of care is timing. The exemption described here depends on the variation being made within two years of death. If that period is missed, this exemption would not apply on the basis described in the source.

It can also be necessary to distinguish between:

• a rearrangement of who benefits from the estate, and
• a transaction in which one beneficiary is effectively buying out another.

The official material gives only a short statement of the rule, so borderline cases may require close attention to the legislation on the exemption and on chargeable consideration.

Key takeaways

• A post-death variation can be exempt from LBTT if it redirects property to a different beneficiary within two years of death.
• The exemption depends on the new beneficiary not giving compensation, and taking on a mortgage can count as compensation.
• A rearrangement under which the original beneficiary receives something else from the estate is not, on the guidance, treated as compensation for this purpose.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on LBTT Exemption for Changing Will Beneficiary Without Compensation

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