Understanding Inheritance Tax Liability in Land Transactions Under Schedule 4 Paragraph 15

When inheritance tax is not chargeable consideration for LTT

For certain land transfers, inheritance tax that the buyer becomes liable for, pays, or agrees to pay is not treated as chargeable consideration for Land Transaction Tax. This applies to transfers under a will, on intestacy, or certain transfers of value for inheritance tax purposes, but any other payment or obligation linked to the land must still be considered under the normal LTT rules.

• The rule applies to land passing by will, intestacy, or certain transfers of value under section 3 of the Inheritance Tax Act 1984.
• If the buyer takes on inheritance tax, pays it, or agrees to pay it in those cases, that inheritance tax element is ignored for LTT.
• The rule does not exclude other consideration, such as taking over a debt or making a payment to an executor or another beneficiary.
• In practice, you should separate the inheritance tax liability from any other money or value given for the property.
• Estate and family arrangements can be difficult if payments are bundled together, so it is important to identify what is tax and what is consideration for the land.

Scroll down for the full analysis.

When a buyer takes on inheritance tax: is it chargeable consideration for LTT?

This page explains a narrow but important rule in Land Transaction Tax (LTT). Sometimes land passes under a will, on intestacy, or as part of a lifetime transfer that is relevant for inheritance tax. If the person receiving the land becomes liable for inheritance tax, pays it, or agrees to pay it, that inheritance tax liability is not treated as chargeable consideration for LTT. That matters because LTT is generally charged by reference to consideration given for the land.

What this rule is about

LTT looks at whether the buyer gives chargeable consideration for a land transaction. In many transactions, that is straightforward: the buyer pays money, takes over a mortgage, or gives something else of value in return for the land.

This rule deals with a specific question: if the buyer of the land also bears inheritance tax connected with the transfer, does that count as consideration for LTT?

The official material says that, in the situations covered by the rule, the answer is no. The inheritance tax liability itself is left out of account for LTT purposes.

What the official source says

The source refers to Schedule 4 paragraph 15. It applies where the land transaction is:

• a transfer of value within section 3 of the Inheritance Tax Act 1984, or
• a disposition effected by will or intestacy.

If, in one of those cases, the buyer becomes liable to pay inheritance tax, actually pays it, or agrees to pay it, that liability, payment, or agreement is not chargeable consideration for LTT.

However, the rule does not remove other forms of consideration. The source gives examples such as:

• taking on a debt, or
• making an equity payment to the executor or to another beneficiary.

Those other amounts or obligations can still be chargeable consideration in the normal way.

What this means in practice

The practical effect is that you should separate the inheritance tax element from everything else the buyer gives or takes on.

If the only thing the buyer does is bear inheritance tax arising in connection with the transfer, that does not by itself count as chargeable consideration under this rule.

But if the buyer also gives something else for the property, that other element may still bring the transaction within the LTT charging rules or increase the taxable consideration.

This is especially important in estate and succession situations, where the transfer of land may not be a simple gift. A beneficiary or recipient may agree to pay money to equalise shares between beneficiaries, or may take the property subject to an existing debt. The source makes clear that those separate elements are not ignored just because inheritance tax is also involved.

How to analyse it

A sensible way to approach the issue is to ask these questions in order:

• Is the land transaction one covered by the rule? The source identifies two categories: a transfer of value within section 3 of the Inheritance Tax Act 1984, or a disposition by will or intestacy.
• Has the buyer become liable for inheritance tax, paid it, or agreed to pay it in respect of that transfer?
• If so, isolate that inheritance tax element and leave it out of account as chargeable consideration.
• Then ask separately whether the buyer has given any other consideration, such as money, assumption of debt, or a balancing payment to an executor or another beneficiary.
• If there is other consideration, consider that other consideration under the normal LTT rules.

The key point is that the inheritance tax element is excluded, but the rest of the transaction still needs to be analysed properly.

Example

Illustration: a beneficiary receives a property under a will. As part of the estate arrangements, the beneficiary agrees to pay inheritance tax attributable to the transfer. That agreement to bear the inheritance tax is not chargeable consideration for LTT.

Now add a further fact: the beneficiary also pays a sum to another beneficiary so that the first beneficiary can keep the whole property. On the source material, that separate payment is not protected by this rule. It may amount to chargeable consideration and must be considered separately.

Why this can be difficult in practice

The main difficulty is identifying what is truly inheritance tax and what is something else given for the land.

In estate administration, payments can be bundled together in informal family arrangements or in documents that do not clearly separate tax liabilities from balancing payments between beneficiaries. If the buyer is paying a single amount, you may need to work out whether part of it is inheritance tax and whether part of it is consideration for acquiring the land.

Another practical difficulty is that not every transfer connected with a death or estate is free from chargeable consideration. The source is careful: it excludes the inheritance tax liability itself, but it does not say that all estate-related transfers are outside LTT.

The reference to a “transfer of value” under section 3 of the Inheritance Tax Act 1984 is also technical. The source does not expand on that concept, so care is needed before assuming the rule applies to every lifetime transfer with an inheritance tax aspect.

Key takeaways

• If the buyer bears inheritance tax on a covered transfer, that inheritance tax is not chargeable consideration for LTT.
• Other things the buyer gives, such as taking on debt or paying another beneficiary, can still be chargeable consideration.
• The practical task is to separate the inheritance tax element from any other value given for the land.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Inheritance Tax Liability in Land Transactions Under Schedule 4 Paragraph 15

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