SDLT on Inherited Property 2026

Normally £0 (no chargeable consideration). But three indirect effects matter: assumed mortgage triggers SDLT, FTB status is permanently lost, and the 5% surcharge applies on your next purchase unless the partial inheritance relief saves you.

Direct SDLT on inheritance: normally nil

Property received by inheritance is not a chargeable transaction for SDLT purposes. Under section 49 of the Finance Act 2003, SDLT applies only where there is chargeable consideration; a gratuitous transfer by way of will or intestacy provides none. So if your parent dies leaving you their house, you take title to the house without paying any SDLT. The same applies to specific legacies, residuary entitlements, and life-interest trust distributions where no consideration moves from beneficiary to estate.

This is settled, longstanding, and applies regardless of the value of the property. A £5 million estate property passing to a sole beneficiary attracts no SDLT, just as a £150,000 property does. Inheritance Tax may apply to the estate (above the £325,000 nil-rate band and any residence nil-rate band relief), but IHT is paid by the estate, not by the beneficiary, and it is conceptually distinct from SDLT. HMRC's SDLT Manual at SDLTM04020 confirms the treatment.

Where multiple beneficiaries inherit shares of the same property (e.g. three siblings each take a one-third interest), the position is the same: no SDLT, regardless of how the shares are subsequently held.

The assumed-mortgage exception

If the beneficiary assumes responsibility for an outstanding mortgage on the inherited property, the outstanding mortgage balance is treated as chargeable consideration under paragraph 8 of Schedule 4 FA 2003. The reasoning is that taking over a debt is equivalent in substance to paying the debtor that amount; the beneficiary is providing consideration to the estate by accepting the liability.

Example: inheriting a £500,000 property with a £150,000 outstanding mortgage that the beneficiary assumes. The chargeable consideration is £150,000. SDLT at standard rates is £1,500 (£0 + 2% × £25,000 above the £125,000 threshold = £500; actually £150k is in the 2% band so SDLT is 2% of £25k = £500... wait, let me redo: £150k = nil-rate £125k + £25k at 2% = £500). The SDLT depends on whether the beneficiary already owns another dwelling: if yes, the 5% additional-dwellings surcharge applies, taking the SDLT to £8,000 (5% on £125k = £6,250 + 7% on £25k = £1,750).

The position is the same whether the mortgage is formally assumed (lender consents to the change of borrower) or informally continued (beneficiary takes title subject to the existing mortgage in the deceased's name and pays the instalments). HMRC will look at substance over form. If you do not want to incur the SDLT, the alternative is to sell the property to repay the mortgage out of the proceeds, which has no SDLT but may have CGT implications.

How inheritance kills first-time buyer status

First-time buyer relief under Schedule 6ZA FA 2003 requires every named buyer on the title to have never owned a residential property interest anywhere in the world. The test is binary and historical: any prior ownership at any time disqualifies you permanently. Inheriting any residential property interest - including a small minority share, including a property in another country - triggers permanent disqualification.

Common scenario: an adult child inherits a one-quarter share in their late parent's home along with three siblings. The four siblings sell the property within 6 months and each receives one-quarter of the net proceeds. Five years later the adult child wants to buy their own first home. They are not a first-time buyer for SDLT purposes, because they previously held a residential interest (the inherited quarter share). FTB relief is unavailable to them on the subsequent purchase, even though they only briefly owned the inherited share and have no other property.

The relief in HMRC SDLT Manual SDLTM29800 sets out the FTB qualifying conditions in detail. There is no minimum-share exception, no “recently-disposed-of inheritance” concession, and no statutory bypass; the only way to preserve FTB status while inheriting is to disclaim the inheritance before it vests (so the share never becomes yours) or to redirect via a Deed of Variation to another beneficiary. Both require advice from a probate solicitor before grant of probate is taken.

The additional-dwellings surcharge and the partial inheritance relief

If you still own the inherited dwelling at the end of the day of your next residential purchase and the inherited dwelling is worth at least £40,000, the 5% additional-dwellings surcharge under Schedule 4ZA FA 2003 applies to the new purchase. So inheriting a £300,000 share in a parent's house and then buying a £400,000 home for yourself triggers SDLT of £30,000 on the new home (5% surcharge on every band) instead of the £10,000 standard SDLT - a £20,000 surcharge cost.

There is a partial relief in paragraph 16 of Schedule 4ZA FA 2003: where the buyer inherited a dwelling within the 3 years before the new purchase, and their share in the inherited dwelling is 50% or less, the inheritance is ignored for surcharge purposes. So a 25% inherited share in a parent's house (typical sibling-split scenario) does not trigger the surcharge on a separate purchase made within 3 years. If the share exceeds 50% or the purchase is more than 3 years after inheritance, the surcharge applies.

To avoid the surcharge entirely, sell the inherited share before completing the new purchase. The surcharge test is applied at the end of the day of the new purchase, so a same-day sale of the inherited share before the new purchase completes will preserve the standard rate. This requires coordination between the two solicitors and is not always practical.

Deeds of Variation and the 2-year reading-back rule

A Deed of Variation is a legal instrument executed by the original beneficiary that redirects their inheritance to another person. Under section 142 of the Inheritance Tax Act 1984 (and corresponding rules for capital gains tax in section 62 TCGA 1992), a Deed of Variation made within 2 years of death and meeting the prescribed requirements is treated as if the deceased had made the redirected gift directly in their will. The original beneficiary is treated as never having received the inheritance.

For SDLT this means the new recipient takes the property directly from the deceased's estate, with no chargeable consideration and no SDLT. The original beneficiary is not treated as having held any property interest, so their FTB status is preserved and the additional-dwellings surcharge does not apply on their subsequent purchases. The Deed must be executed within 2 years of death, must be in writing, must contain the statutory declaration under section 142 IHTA 1984, and must not be made for any consideration in money or money's worth (other than the redirection itself).

Deeds of Variation are widely used in estate planning when the original beneficiaries do not need the inheritance themselves (perhaps because they are already wealthy or because they want to direct it to children or grandchildren). Used correctly they have no SDLT consequences. Used incorrectly (e.g. as part of a larger arrangement involving consideration or with the wrong technical wording) they can fail to qualify under section 142, with the inheritance treated as having vested in the original beneficiary first.

Selling the inherited property: CGT not SDLT

SDLT applies only to the buyer in a property transaction, not to the seller. When you sell an inherited property, the buyer pays SDLT at the rates applicable to them (FTB, standard, second-home, etc), but you as the seller pay no SDLT on the sale. You may have a Capital Gains Tax liability on the difference between the sale price and the probate value (the “step-up” base value at the date of death), although main-residence relief may apply if you have occupied the property as your only or main residence between inheriting and selling.

For inherited rental property that you continue to let, the rental income is your taxable income. The CGT base on eventual sale is the probate value, with the tax payable on the gain at the residential CGT rates (24% for higher-rate taxpayers and 18% for basic-rate taxpayers from 30 October 2024, reduced from 28% and 18% by the Autumn Statement 2024 measure).

Frequently Asked Questions

Related guides