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Stamp Duty on Inherited Property

Losing a loved one or a close relative is a painful process, although it sometimes comes with rewards. Most property owners usually transfer their property ownership to their next of kin (or anyone else in the family) at their demise.
While the process of receiving property from a deceased relative is not necessarily complicated, it becomes one when the beneficiaries do not have the right guidance.

Did You Just Inherit a Property?

There are different aspects of inheriting a property, including stamp duty. Most beneficiaries struggle to understand the concept of stamp duty on inherited property. This post attempts to identify and resolve these struggles by discussing all there is to know about stamp duty on inherited properties.

Let’s start by understanding what Stamp Duty is all about.

What is Stamp Duty?

Stamp duty is formally referred to as the Stamp Duty Land Tax (SDLT). This is a formal UK property tax payable when purchasing a piece of land or property, provided the sales price is above a certain threshold.

The exact amount payable as stamp duty is determined based on the purpose and value of the property in question. It also depends on the type of buyer you are. For instance, a first-time buyer will pay less than a previous homeowner or a landlord.

Since stamp duty is calculated on a sliding scale, it gets increasingly higher as the sales price of the property increases. Up to 2% is payable if the property is worth between £125,001 and £250,000 and up to 12% if it is worth more than £1.5 million.

Is Stamp Duty Payable on Inherited Property?

If you have just inherited a property from a close relative or a parent, chances are you will not be making any quick decisions on your inheritance. Your hands are literally tied on the property until probate is complete.

For context, probate involves settling the debts and sorting other pressing affairs of the deceased by the will executors. This comes first before the assets are handed over to the beneficiaries. The exact duration of probate varies – sometimes, it can take up to a year.

Now, to the question, “Is stamp duty payable on an inherited property?” The direct answer is “No.” Stamp duty is not levied on inherited properties.

This is applicable whether you are taking on the outstanding mortgage left on the property (if any) or not.

So, as a beneficiary, you can claim the ownership of a property you have inherited without paying stamp duty.

However, you may have to pay inheritance tax, depending on the value of the property or estate you are claiming.
Interestingly, there are certain situations where beneficiaries may have to pay STLD, especially when deciding what to do with the state being passed on.

When Is Stamp Duty Payable on Inherited Property?

Stamp duty becomes payable on inherited properties in some circumstances, as indicated below.

When buying the share of other beneficiaries.
Stamp duty can become a consideration when a beneficiary wants to claim complete ownership of a jointly-inherited property.
In a situation where many people inherited the same property, the inherited property is said to have joint beneficiaries. If one of the beneficiaries decides to buy another beneficiary’s share on the inherited property, the buyer may have to pay stamp duty if the claim is above the threshold. You may also be liable for a 3% Stamp Tax Land Duty surcharge on the share you are purchasing. However, this is only applicable if the beneficiary is already a homeowner.

It is best to speak to an independent financial advisor when considering buying out other beneficiaries. While the process can be complicated, experts will help you understand whether you need to pay stamp duty or not and whether buying the inheritance outrightly is a smart financial move.

What taxes are payable on an inherited property?

Stamp duty is not the only tax associated with inherited property. While a beneficiary does not have to pay stamp duty on inherited property, they may have to pay other taxes, especially if the deceased owner’s estate has not paid them. In such situations, the HMRC will contact the new owners of the property (the beneficiaries) with the details of the payable taxes and why they need to pay them.

Suppose a beneficiary decides to sell the inherited property. In that case, the Capital Gains Tax is payable on the sale, except if the property is their primary residence at the time of sale. If an individual inherits a second home, they must choose one of the properties as their primary residence and inform the HMRC of their choice.

Selling one of the two inherited properties without informing the HMRC leaves the HMRC at the discretion to decide which one to be designated as the primary residence.

First Time Buyer and Inherited Property

Inheriting a property means you are no more a first-time buyer, even if the only property you have in your name is the inherited property. Whether you inherited a portion of the property or the entire estate, being a beneficiary of an inherited property automatically makes you a property owner. This means you will be liable for all the payable stamp duty on your subsequent purchases.

In some cases where a beneficiary is halfway through buying their first property before being confirmed as a beneficiary of an inheritance, they may still have to pay the stamp duty land tax charge on the initial property when finalising the purchase.

For instance, if Mr X. is halfway into buying a new flat in London before his father’s demise, who had another property listed in Mr X’s name in his will, Mr X will need to pay the 3% SDLT charge on his London flat purchase. This is applicable whether the inherited property is within the UK or located overseas.

Speak to the Experts

Stamp Duty on inherited properties can be complicated to navigate, and considering how important it is, it is best to work with experts when in doubt. We will be happy to talk to you and answer all your questions about stamp duty and how it affects inherited properties. Feel free to get in touch today.

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Stamp Duty on Inherited Property

Losing a loved one or a close relative is a painful process, although it sometimes comes with rewards. Most property owners usually transfer their property ownership to their next of kin (or anyone else in the family) at their demise. While the process of receiving property from a deceased relative is not necessarily complicated, it becomes one when the beneficiaries do not have the right guidance.

Did You Just Inherit a Property?

There are different aspects of inheriting a property, including stamp duty. Most beneficiaries struggle to understand the concept of stamp duty on inherited property. This post attempts to identify and resolve these struggles by discussing all there is to know about stamp duty on inherited properties. Let’s start by understanding what Stamp Duty is all about.

What is Stamp Duty?

Stamp duty is formally referred to as the Stamp Duty Land Tax (SDLT). This is a formal UK property tax payable when purchasing a piece of land or property, provided the sales price is above a certain threshold. (Excluding Scotland) The exact amount payable as stamp duty is determined based on the purpose and value of the property in question. It also depends on the type of buyer you are. For instance, a first-time buyer will pay less than a previous homeowner or a landlord. Since stamp duty is calculated on a sliding scale, it gets increasingly higher as the sales price of the property increases. Up to 2% is payable if the property is worth between £125,001 and £250,000 and up to 12% if it is worth more than £1.5 million. Please note that in Scotland Stamp Duty Land Tax does not apply, the applicable tax is The Land and Buildings Transaction Tax (LBTT).

Is Stamp Duty Payable on Inherited Property?

If you have just inherited a property from a close relative or a parent, chances are you will not be making any quick decisions on your inheritance. Your hands are literally tied on the property until probate is complete. For context, probate involves settling the debts and sorting other pressing affairs of the deceased by the will executors. This comes first before the assets are handed over to the beneficiaries. The exact duration of probate varies – sometimes, it can take up to a year. Now, to the question, “Is stamp duty payable on an inherited property?” The direct answer is “No.” Stamp duty is not levied on inherited properties. This is applicable whether you are taking on the outstanding mortgage left on the property (if any) or not. So, as a beneficiary, you can claim the ownership of a property you have inherited without paying stamp duty. However, you may have to pay inheritance tax, depending on the value of the property or estate you are claiming. Interestingly, there are certain situations where beneficiaries may have to pay STLD, especially when deciding what to do with the state being passed on.

When Is Stamp Duty Payable on Inherited Property?

Stamp duty becomes payable on inherited properties in some circumstances, as indicated below. When buying the share of other beneficiaries. Stamp duty can become a consideration when a beneficiary wants to claim complete ownership of a jointly-inherited property. In a situation where many people inherited the same property, the inherited property is said to have joint beneficiaries. If one of the beneficiaries decides to buy another beneficiary’s share on the inherited property, the buyer may have to pay stamp duty if the claim is above the threshold. You may also be liable for a 3% Stamp Tax Land Duty surcharge on the share you are purchasing. However, this is only applicable if the beneficiary is already a homeowner. It is best to speak to an independent financial advisor when considering buying out other beneficiaries. While the process can be complicated, experts will help you understand whether you need to pay stamp duty or not and whether buying the inheritance outrightly is a smart financial move.

What taxes are payable on an inherited property?

Stamp duty is not the only tax associated with inherited property. While a beneficiary does not have to pay stamp duty on inherited property, they may have to pay other taxes, especially if the deceased owner’s estate has not paid them. In such situations, the HMRC will contact the new owners of the property (the beneficiaries) with the details of the payable taxes and why they need to pay them. Suppose a beneficiary decides to sell the inherited property. In that case, the Capital Gains Tax is payable on the sale, except if the property is their primary residence at the time of sale. If an individual inherits a second home, they must choose one of the properties as their primary residence and inform the HMRC of their choice. Selling one of the two inherited properties without informing the HMRC leaves the HMRC at the discretion to decide which one to be designated as the primary residence.

First Time Buyer and Inherited Property

Inheriting a property means you are no more a first-time buyer, even if the only property you have in your name is the inherited property. Whether you inherited a portion of the property or the entire estate, being a beneficiary of an inherited property automatically makes you a property owner. This means you will be liable for all the payable stamp duty on your subsequent purchases. In some cases where a beneficiary is halfway through buying their first property before being confirmed as a beneficiary of an inheritance, they may still have to pay the stamp duty land tax charge on the initial property when finalising the purchase. For instance, if Mr X. is halfway into buying a new flat in London before his father’s demise, who had another property listed in Mr X’s name in his will, Mr X will need to pay the 3% SDLT charge on his London flat purchase. This is applicable whether the inherited property is within the UK or located overseas.

Speak to the Experts

Stamp Duty on inherited properties can be complicated to navigate, and considering how important it is, it is best to work with experts when in doubt. We will be happy to talk to you and answer all your questions about stamp duty and how it affects inherited properties. Feel free to get in touch today.

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