Inheritance and Stamp Duty Land Tax

[Street66]

Looking for some guidance.

My mother in law has recently passed away and my wife and I are considering buying her residence.

For sake of this example, we are assuming a total estate of £2m after IHT, to be split 4 ways - with the main residence about £1m and the remainder of the estate another £1m.

If we make a variation to the will to maximise our share of the residence, so we would get 50% of the property and none of the remaining estate - how does SDLT work when we acquire the remaining 50% from the other 3 siblings?

So £1m residence - of which we own 50%. We buy out other family members their share = £500,000. This would be our only property and we would be using it as our main residence.

Using the calculator based on a purchase price of £500,000 gives SDLT of £10,000. Is this right?

TIA,
Street66

[PinkDalek]

Using the calculator based on a purchase price of £500,000 gives SDLT of £10,000. Is this right?

As no-one else has replied, I have used your figures here Calculate Stamp Duty Land Tax (SDLT) https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro and do end up with £10,000 if you are treated as first-time buyers.

However, I'd be cautious in relying solely on the calculator without having studied the various guidelines/laws etc.

In particular:

1. If the eventual consideration is a pound over £500,000 the SDLT will be £15,000, as I'm sure you've seen.

2. You'll have seen the question Have you ever owned or part owned another property? and I note your This would be our only property and we would be using it as our main residence. Recalling your username from TMF and on here, I had a quick look at prior posts of yours. One included We have an unencumbered property in the UK but think its unlikely we would ever permanently live in it. Depending on the precise details of that property you may need again to look at the part in the calculator which says:

We only need to know about residential property, or property that has both residential and non-residential use.

This includes freehold property, or leasehold property of at least 21 years. Select yes if you either:

bought a property
inherited a property
are a beneficiary of a trust that owns a property

I don't find that wording very helpful but it may well be you need to investigate the implications further.

Hopefully others can spell this all out in more detail, perhaps after you've told us a little more about the other property you had (presumably sold before your return to the UK), to ensure you are indeed treated as first-time buyers.

A cross post at Legal Issues (Practical) including wills and probate back to here might also be an idea, especially to see if there are other options available generally.

Edit: See Chapter 3: Definition of a first time buyer https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/759714/Stamp_Duty_Land_Tax_relief_for_first_time_buyers_-_guidance_note.pdf which includes:

In order to count as a first time buyer, a purchaser must not, either alone or with others, have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere in the world. ...

It also includes This includes previous acquisitions by inheritance or gift which might impact on the whole scenario anyway.

PD - not an SDLT expert!

[JohnB]

Why do you need to do a variation on the will to get from 25 to 50% of the house? Can't the executors just assign the assets in the estate themselves. I ask because I live with my mother in her house, and assume I'd get it all plus some cash, while my brother just got some more cash, with no variation needed.

[Lootman]

Why do you need to do a variation on the will to get from 25 to 50% of the house? Can't the executors just assign the assets in the estate themselves. I ask because I live with my mother in her house, and assume I'd get it all plus some cash, while my brother just got some more cash, with no variation needed.

If the Executors can just do that, then why not go further and assign the entire property to the OP, and then also create a debt or liability of half of the house value to the other beneficiaries? That way no stamp duty would be owed at all.

Effectively they'd be getting a million pound house with a £500,000 mortgage in favour of the others. But of course all beneficiaries would have to agree, just as with a deed of variation. And I suspect the others would rather have the cash than an asset in the form of a lien against the property. I know I would.

[Street66]

Manny thanks all! I hadn’t thought about the possibility of encumbering the property with a debt to equalise the inheritance - that might work perfectly!

Cheers,
Street66