Stamp Duty When You Inherit Property: Beneficiary Rules, Deeds of Variation & Mortgage Assumption

Many people confuse Inheritance Tax (IHT) with Stamp Duty Land Tax (SDLT). They are entirely separate taxes. IHT is paid by the estate before assets are distributed. SDLT is a tax on land transactions, and inheritance is not a transaction for SDLT purposes.

The sections below explain exactly when SDLT does and does not apply, with reference to the specific legislation and common scenarios around probate, deeds of variation, and estate purchases.

The SDLT exemption for inherited property is set out in Schedule 3 paragraph 3(a) of the Finance Act 2003. It provides that a land transaction is exempt from SDLT if it is "a transaction effected by assent or appropriation by a personal representative in or towards satisfaction of a legacy or the title on intestacy of a beneficiary."

In plain English: when an executor or administrator transfers property from a deceased person's estate to a beneficiary (whether under a will or the rules of intestacy), that transfer is not a chargeable land transaction. No SDLT is due, no SDLT return is required, and there is no SDLT threshold to meet or exceed.

What the exemption covers

• ✓Property passing by will (testate succession)
• ✓Property passing under intestacy rules (when there is no will)
• ✓Joint tenancy property passing by survivorship (the deceased's share passes automatically to the surviving joint tenant)
• ✓Property transferred by assent from the executor to a named beneficiary
• ✓Any value of property: the exemption is not capped

How the assent works in practice

An assent is the legal document by which the executor transfers registered property to the beneficiary. It must be in writing, executed as a deed, and registered at HM Land Registry. The executor signs the assent in their capacity as personal representative, and the beneficiary is registered as the new legal and beneficial owner.

The assent does not require an SDLT return because the transaction is not notifiable: it falls squarely within the Schedule 3 exemption. The Land Registry will complete the registration without an SDLT certificate, relying instead on the exemption code.

The Schedule 3 exemption applies only where there is no "chargeable consideration." If money or money's worth passes as part of the transaction, SDLT applies on that consideration. Four scenarios commonly give rise to SDLT during estate administration.

1. Taking on a mortgage as part of the inheritance

Example: You inherit a property worth £400,000 with a £120,000 mortgage outstanding. You are inheriting the equity (£280,000) tax-free, but you assume the £120,000 debt. SDLT is calculated on £120,000 as the chargeable consideration.

At 2026 SDLT rates, £120,000 falls below the £125,000 nil-rate threshold, so no SDLT would actually be due in this example. But for properties in high-value areas with large mortgages, the debt assumption could trigger SDLT at the standard residential rates (2% from £125,001 to £250,000, 5% above £250,000).

2. Buying out a sibling's share of an inherited property

When two or more beneficiaries inherit a property jointly and one wishes to become the sole owner, they must buy out the other beneficiaries' shares. The amount paid for those shares is chargeable consideration for SDLT purposes.

Example: Three siblings inherit a property worth £450,000 equally (each receives a one-third share worth £150,000). One sibling wants sole ownership and pays the other two £300,000 to buy their shares. SDLT is calculated on £300,000 (the consideration paid). At standard 2026 rates, that would be:

If the buying sibling already owns another property, the 5% higher-rate surcharge applies on top, as this is an acquisition of additional residential property. The surcharge would add £15,000, taking the total to £17,500.

3. Purchasing from the estate rather than inheriting

If you purchase property from an estate (for example, you are not a named beneficiary but the executor sells it to you), that is a standard land transaction subject to SDLT at full rates — that scenario is covered in our dedicated probate property purchase guide, which has the executor-sale process, grant-of-probate timing, below-market-value rules and worked examples for the buyer side.

4. Deeds of variation with outside consideration

Deeds of variation are generally SDLT-free (Schedule 3 paragraph 4 FA 2003), but only where the consideration is entirely within the estate. If a beneficiary gives up their inheritance in return for cash paid from outside the estate by another beneficiary, that cash payment is chargeable consideration. Full details in the deeds of variation section.

A deed of variation (also called a deed of family arrangement) allows beneficiaries to redirect their inheritance within two years of the death. The instrument is widely used for IHT and CGT planning, but its SDLT treatment has specific rules that must be understood carefully.

The SDLT exemption: Schedule 3 paragraph 4 FA 2003

Schedule 3 paragraph 4 exempts a deed of variation from SDLT where:

• 1.It is made within two years of the deceased's death
• 2.The only consideration is the making of a variation of another disposition

The key phrase is "the only consideration is the making of a variation of another disposition." This means the swap must be entirely internal to the estate. If the parties are exchanging assets from the estate (property for investments held by the estate, for example), the deed is SDLT-free. If one beneficiary receives property and pays cash from their own pocket to compensate another beneficiary, that outside cash is chargeable consideration and SDLT becomes payable.

Example: SDLT-free deed of variation

Example: SDLT triggered by deed of variation

Formal requirements for a valid deed of variation

• •Must be in writing and executed as a deed (signed and witnessed)
• •Must be made within two years of the date of death
• •Must state that it is to be read back for IHT or CGT purposes (if those reliefs are intended)
• •Cannot be made after the beneficiary has already received and used the inherited asset

Legal advice is essential before executing a deed of variation. An incorrectly drafted deed may fail to achieve the SDLT exemption, or may create unexpected IHT or CGT consequences.

When there is no cash purchase price but a mortgage is assumed, the SDLT rules require you to identify the "chargeable consideration." Under section 48 and Schedule 4 Finance Act 2003, chargeable consideration includes money and "money's worth," which includes debt assumed by the buyer.

How debt assumption is valued

If you inherit a property and the will (or intestacy rules) transfer it to you subject to an outstanding mortgage, and you agree to take over responsibility for that mortgage, the outstanding balance at the date of the assent is the chargeable consideration.

This is the amount on which SDLT is calculated, using the same rate tables that apply to a purchase. The market value of the property itself is not used: only the debt assumed.

Practical scenarios

Note: the nil-rate band for standard residential SDLT is £250,000 (as of April 2025). FTB nil-rate band is £300,000 for eligible buyers.

An "appropriation" occurs when an executor satisfies a cash legacy (a gift of money in the will) by transferring property instead of cash. For example, a will leaves £200,000 to a beneficiary, and the executor, rather than selling the property to raise cash, transfers a property worth £200,000 to the beneficiary in satisfaction of the cash legacy.

SDLT treatment of appropriations

Schedule 3 paragraph 3(a) FA 2003 covers appropriations by personal representatives in satisfaction of a legacy or residue entitlement. Where the appropriation is in satisfaction of a specific property bequest (the will says "I leave 42 High Street to X"), it falls squarely within the exemption.

Where the appropriation satisfies a cash legacy (the will says "I leave £150,000 to X" and the executor transfers a property worth £150,000 instead), the position is less clear. HMRC's view, supported by the wording of Schedule 3, is that the appropriation is still exempt where it is made in or towards satisfaction of the beneficiary's entitlement in the estate. The beneficiary is not paying cash to the estate; they are receiving an asset in satisfaction of what they are owed.

However, if the value of the property transferred exceeds the cash legacy and the beneficiary makes up the difference in cash to the estate, the cash element constitutes chargeable consideration, and SDLT is payable on that amount. Legal and tax advice is essential before using an appropriation strategy.

Scotland and Wales have their own devolved property taxes, but both treat inherited property transfers as exempt on the same principles as SDLT.

Scotland: Land and Buildings Transaction Tax (LBTT)

Under the Land and Buildings Transaction Tax (Scotland) Act 2013, transfers on death are not notifiable transactions and no LBTT is due. The Scottish equivalent of Schedule 3 FA 2003 provides the same exemption. Deeds of variation are similarly treated as exempt provided they meet the same conditions (within two years, no outside consideration).

In Scotland, "confirmation" is the equivalent of probate in England and Wales. The executor (called the "executor-dative" or "executor-nominate") obtains confirmation from the Sheriff Court, then transfers property by docket or disposition.

For buying out a sibling's share or taking on a mortgage in Scotland, LBTT applies on the same basis as SDLT, using LBTT rates. Scotland's Additional Dwelling Supplement (ADS) is currently 8% (as of December 2024, increased from 6%). If you already own another property, the ADS applies to any purchase, including buying out an inherited share.

Wales: Land Transaction Tax (LTT)

Wales operates Land Transaction Tax under the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017. Transfers on death are exempt and no LTT return is required. Deeds of variation are treated on the same basis as in England.

Wales does not have a flat surcharge for additional properties in the same way as England. Instead, separate and higher rate bands apply for additional residential property purchases. If you buy out a sibling's share of a Welsh property and you already own another property, the higher residential LTT rate bands apply. Seek specific Welsh LTT advice for these transactions.

Even where no SDLT is payable, proper documentation of an inherited property transaction is important for Land Registry registration, future capital gains tax calculations, and evidencing the exempt nature of the transaction.

When an SDLT return is required

A land transaction must be notified to HMRC (via an SDLT return) if it is a "notifiable" transaction. Under section 77 Finance Act 2003, a transaction is notifiable if it results in a chargeable transaction, even if the SDLT due is nil (for example, where consideration falls within the nil-rate band).

However, a transaction that is exempt under Schedule 3 (including inheritance transfers and qualifying deeds of variation) is not a chargeable transaction at all. It is therefore not notifiable, and no SDLT return is required. This means:

• ✓No SDLT return for a straightforward inheritance by assent
• ✓No SDLT return for a qualifying deed of variation with no outside consideration
• ✗SDLT return IS required where a mortgage is assumed (even if SDLT due is nil)
• ✗SDLT return IS required where a sibling's share is bought out above the nil-rate threshold
• ✗SDLT return IS required for any estate purchase above £40,000

SDLT return deadlines

Where an SDLT return is required, it must be filed within 14 days of the effective date (normally the date of completion or execution of the deed). SDLT due must be paid at the same time. Late filing attracts penalties from HMRC.

Documents to retain

Even when no return is required, keep the following for at least 6 years (HMRC's standard enquiry window):

• •A copy of the will (or letters of administration for intestacy)
• •The Grant of Probate (or Confirmation in Scotland)
• •The assent or disposition transferring the property
• •Land Registry confirmation of the change of ownership
• •Any mortgage statements confirming the balance at the date of transfer (if debt was assumed)

For full details on the SDLT return process, filing requirements, and what happens if you miss the deadline, see our guide to SDLT return requirements.

Related Guides

• Inheriting property and about to buy your next home? See how inheritance affects your future purchase for the 50% rule, 3-year window, and FTB implications.

• Need to calculate SDLT on a specific estate purchase? Use the stamp duty calculator.

• Inherited a share and buying another property? See inherited share additional dwelling rules.

• For the detailed probate SDLT return process, see SDLT return requirements.