Stamp Duty Land Tax and probate property

Inheriting property can be complicated, particularly when it comes to understanding the tax implications. One of the key taxes to consider is Stamp Duty Land Tax (SDLT). Here, we set out specifics of SDLT relating to probate property, offering guidance and examples to explain when and how SDLT applies, and when tax relief might be available to beneficiaries.

What is Stamp Duty Land Tax?

Stamp Duty Land Tax is a tax payable on property and land transactions in England and Northern Ireland. It applies to the purchase price of property or land when it is bought, transferred, or leased. The SDLT rate depends on the value of the property, with higher rates for more expensive properties and additional surcharges for second homes and buy-to-let properties.

What happens if I inherit a property or land?

When a property is inherited by a beneficiary, either under a will or through intestacy rules, the transfer to the beneficiary is exempt from SDLT. This relief does not apply if the beneficiary provides any payment for acquiring the property, known as giving consideration. However, a beneficiary taking on the responsibility for a secured debt, such as a mortgage, is not considered “consideration” for this purpose.

Case Studies

Gift of property in a will

The deceased left a property worth £300,000 to a beneficiary in his will. Regardless of whether the beneficiary already owns a property, this inherited property is exempt from SDLT.

Gift of cash in a will

Instead of gifting a property, the deceased left a cash gift of £300,000 in their will to a beneficiary. Due to limited cash in the estate, the beneficiary opts to receive the deceased’s property worth £200,000 and a cash legacy of £100,000 to fulfill their entitlement under the will. This transfer is also exempt from SDLT, even if the property has a mortgage that the beneficiary agrees to assume.

Beneficiary pays money to estate in return for receiving property

The deceased left £200,000 to a trust, with the remainder of the estate going to a beneficiary. The estate consists solely of a property. If the beneficiary decides to take the property as their gift under the will and pays the trustees of the trust £200,000 to satisfy the will’s terms, this transfer is not exempt from SDLT.

How Much Stamp Duty Do I Pay?

If you already own a property and inherit another, you will incur an additional 3% SDLT charge if you sell your home and purchase a replacement property. There are exemptions to this rule, including cases where you hold less than a 50% share in an inherited property. Be sure to include any share owned by your spouse or civil partner when calculating the shares before determining if an exemption applies.

The current SDLT rates for residential property in England and Wales can be found here:

I’m a First-Time Buyer Inheriting a Home. Will I Need to Pay Stamp Duty?

Yes, there are no exemptions to the SDLT laws for first-time buyers inheriting property. You will still be considered as owning a home, even though you did not purchase it.

Remember:

The rules surrounding Stamp Duty in England are complex. It is advisable to seek professional tax advice if you are administering an estate involving property or inheriting property under a will or through intestacy. Find a Solicitor here: Find A Solicitor