Inheritance & Stamp Duty: How Property Transfers on Death Affect SDLT and First-Time Buyer Status

When someone dies and their property passes to beneficiaries—whether through a will or under intestacy rules—no Stamp Duty Land Tax (SDLT) is payable on the transfer. This exemption is automatic and applies universally.

The rationale is straightforward: the transfer is not a commercial transaction. The beneficiary does not "purchase" the property; they inherit it by operation of law. HMRC does not treat inheritance as a chargeable land transaction for SDLT purposes.

However, Inheritance Tax (IHT) may be payable on the estate if its value exceeds the IHT threshold (£325,000 as of 2026, with additional allowances for main residence). IHT and SDLT are entirely separate taxes: IHT is paid by the estate before distribution; SDLT applies to land transactions. Inheritance involves no land transaction, so no SDLT arises.

The exemption applies regardless of the relationship between the deceased and the beneficiary. A spouse, child, sibling, friend, or charity all benefit from the same exemption when inheriting property.

When someone dies owning property, their estate must go through probate (or confirmation in Scotland). The executor or administrator is responsible for managing the estate, paying debts and taxes, and distributing assets to beneficiaries.

What is Probate?

Probate is the legal process of administering a deceased person's estate. The executor named in the will (or an administrator if there is no will) obtains a Grant of Probate from the court, which gives them authority to deal with the deceased's assets, including property.

Transferring Property to Beneficiaries

Once probate is granted, the executor can transfer legal title to property to the beneficiaries. This is typically done by executing an assent (a legal document transferring property from the estate to a beneficiary). The assent is registered with the Land Registry (or Land and Buildings Transaction Tax in Scotland, Land Registry in Wales).

No SDLT is payable on the assent, as it is a transfer on death, not a land transaction for consideration. The beneficiary becomes the legal owner of the property without any stamp duty liability.

Executor's Role and SDLT

Executors do not pay SDLT when transferring property to beneficiaries. However, if the executor sells property on behalf of the estate (to pay debts or because the will directs it), the buyer of that property pays SDLT on the purchase price according to normal rules. The executor is acting as the seller in that transaction.

One of the most important—and often overlooked—consequences of inheriting property is the permanent loss of first-time buyer (FTB) relief.

What is First-Time Buyer Relief?

First-time buyers purchasing a residential property for up to £625,000 benefit from reduced SDLT rates. No SDLT is payable on the first £425,000, and 5% on the portion from £425,001 to £625,000. This relief is only available to buyers who have never owned a residential property anywhere in the world.

How Inheritance Affects FTB Status

HMRC defines a first-time buyer as someone who has never owned a residential property—whether in the UK or abroad, whether inherited, purchased, or gifted. Inheriting a residential property counts as ownership, even if:

• •You never lived in the inherited property
• •You sold the inherited property immediately
• •You inherited only a share (e.g., 25% with siblings)
• •The inherited property was a ruin or uninhabitable

Planning and Mitigation

If you are likely to inherit property and are considering buying a home soon, you may wish to discuss timing with the estate. In some cases, beneficiaries agree to sell inherited property immediately and divide proceeds, but this does not avoid the FTB disqualification—you still owned the property, even briefly.

Alternatively, if you are making a will and your beneficiaries are young first-time buyers, consider whether leaving property in trust (with income but not ownership passing to the beneficiary) might preserve their FTB status. This is complex and requires specialist legal advice.

A deed of variation (also called a deed of family arrangement) allows beneficiaries to redirect their inheritance to someone else within two years of the death. This is commonly used for tax planning or family circumstances.

How Deeds of Variation Work

Suppose a parent dies and leaves their property to their adult child. The child, already owning a home, decides to redirect the inherited property to their own child (the grandchild of the deceased). A deed of variation can be executed to achieve this.

For tax purposes, the variation is treated as if the deceased made the bequest directly to the ultimate beneficiary. In the example above, the grandchild is treated as inheriting directly from the grandparent, not from the parent.

SDLT Implications

No SDLT is payable on a deed of variation redirecting inherited property. The property passes from the deceased to the new beneficiary as if it had been bequeathed to them originally. However, the new beneficiary is treated as having owned the property from the date of death, which affects their first-time buyer status if applicable.

Time Limits and Formalities

A deed of variation must be executed within two years of death and must be in writing and signed by the person giving up the benefit. It should state that it is intended to have effect for Inheritance Tax and/or Capital Gains Tax purposes. Legal advice is essential to ensure the deed is valid.

If you inherit a property and already own another residential property, you become the owner of multiple properties. This has significant implications if you later purchase an additional property.

What is the Additional Property Surcharge?

When you purchase a residential property and you already own another residential property, an additional 5% SDLT surcharge applies to the entire purchase price. This is commonly called the "second home surcharge" or "additional dwelling supplement."

How Inherited Property Triggers the Surcharge

Suppose you inherit your parents' home. You already own your own home. You now own two residential properties. If you buy a third property (for example, a buy-to-let investment), the 5% surcharge applies to that purchase, because you own more than one residential property at the time of the new purchase.

Replacing Your Main Residence

If you sell your existing main residence and buy a new one, the surcharge does not apply, even if you own an inherited property. The replacement main residence exemption allows you to avoid the surcharge when buying a new home to replace your previous main residence.

However, if you retain your existing main residence and buy another, the surcharge applies. The inherited property counts toward your total residential property ownership.

Selling the Inherited Property

If you sell the inherited property within three years of purchasing a new property, you may be able to claim a refund of the 5% surcharge. This is because you would end up with only one residential property. HMRC allows a three-year window to dispose of the additional property and reclaim the surcharge.

If you purchase a property from the estate of a deceased person—rather than inheriting it—normal SDLT rules apply. This scenario arises when the will directs the executor to sell property, or when beneficiaries agree to sell rather than inherit.

Executor as Seller

The executor acts on behalf of the estate to sell the property. The sale is a standard land transaction. You, as the buyer, pay SDLT on the purchase price according to the applicable rates (standard residential, first-time buyer, or additional property rates, depending on your circumstances).

Buying from a Beneficiary Who Inherited

Alternatively, a beneficiary may inherit the property (no SDLT on inheritance) and then sell it to you. In this case, the beneficiary is the seller, and you pay SDLT as normal. The fact that the beneficiary recently inherited the property is irrelevant to your SDLT liability.

Family Sales

If a family member inherits a property and then sells it to you (another family member), SDLT is payable on the actual consideration (market value or the price paid). HMRC may scrutinise below-market transactions between connected parties to ensure the correct SDLT is paid.

Scotland and Wales operate their own property transaction taxes, but the treatment of inherited property is the same as in England and Northern Ireland.

Scotland: Land and Buildings Transaction Tax (LBTT)

Transfers on death are exempt from LBTT. When property is inherited, no LBTT is payable. The same principles apply regarding first-time buyer disqualification and the Additional Dwelling Supplement (Scotland's equivalent to the 5% surcharge).

If you inherit property in Scotland and already own another property, the Additional Dwelling Supplement (8% in Scotland, as of 2026) applies if you purchase a further residential property.

Wales: Land Transaction Tax (LTT)

Transfers on death are exempt from LTT. Inherited property affects first-time buyer status and the higher residential rates for additional properties (separate rate bands in Wales) in the same way as SDLT in England.