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Deemed Ownership in SDLT: Lessons from the Angela Rayner Case

A Political Storm Over Property Tax

Deputy Prime Minister Angela Rayner has found herself at the centre of a tax controversy involving the underpayment of Stamp Duty Land Tax (SDLT).

The issue arose after she purchased a flat in Hove in May 2025, paying standard SDLT rates on the £800,000 transaction. However, it later emerged that she had previously transferred her share of the family home, which she purchased in April 2016 with her then-husband Mark, into a trust for their disabled son. Under complex deeming provisions in SDLT legislation, Rayner is treated as still owning that property for SDLT purposes, thereby triggering the 5% surcharge applied to second homes or additional properties.

Though the trust had been established by court order and she had said that she had relied on professional advice from “a conveyancer and two experts in trust law”, Rayner ultimately admitted under-paying stamp duty by £40,000, referred herself to the independent ethics adviser and began discussions with HMRC about settling the shortfall. It is worth adding that the conveyancing firm had since denied that they gave additional SDLT advice and relied on Rayner’s instructions to compute the SDLT due. Now, with confirmation that she breached the ministerial code and her resignation confirmed, her political career appears to be in tatters.

Her case illustrates how technical tax provisions can entrap even high-profile public figures and highlights the importance of understanding deemed ownership rules under Schedule 4ZA of the Finance Act 2003.

Deemed Interests Under Schedule 4ZA of the Finance Act 2003

The additional SDLT surcharge on second homes is governed by Schedule 4ZA of the Finance Act 2003. Under paragraph 8, individuals may be deemed to hold a “major interest” in residential property even when they do not hold legal title personally.

Specifically:

“A person is treated as having a major interest in a dwelling if it is held in trust for a child (under 18) of the person, or of the person’s spouse or civil partner.”

In practical terms, this means that if a parent places a property into a trust for their minor child, even if done by court order, they may still be treated as owning it when calculating SDLT on future purchases. This can inadvertently trigger the 5% surcharge for owning multiple properties.

This provision aims to prevent tax avoidance through indirect ownership structures. However, it also catches entirely legitimate trust arrangements, including those established for the care of vulnerable or disabled minors.

Trusts for Vulnerable People: No SDLT Exemption

There is a common misconception that trusts for disabled beneficiaries enjoy broad tax exemptions. While Capital Gains Tax and Inheritance Tax rules provide favourable treatment for vulnerable beneficiary trusts, SDLT does not follow suit. HMRC’s SDLT Manual makes it clear that:

• A parent is deemed to have an interest in property held in trust for their minor child, regardless of disability.
• This applies whether or not the parent is a trustee.
• Court-ordered trusts do not override the deeming rules.

The Rayner Example

Angela Rayner purchased a property in Hove in May 2025 and paid standard SDLT, having transferred her prior home into a trust for her disabled son. However, under paragraph 8, she was deemed to still have an interest in that first property, meaning the higher SDLT rate should have applied.

Although Rayner notes she had relied upon professional advice from “a conveyancer and two experts in trust law”, HMRC’s position is clear: deemed ownership applies regardless of intent or legal title, and ignorance of the rule is no defence.

The Risk of Inadvertent Non-Compliance

Rayner’s case is not unique. Many individuals overlook these deeming provisions, particularly when trusts are set up for personal or protective reasons rather than for tax planning.

Key risks include:

• Unwitting underpayment of SDLT when purchasing a new property.
• Exposure to interest and penalties from HMRC (up to 30% in careless cases).
• Reputational damage, particularly for individuals in public office or regulated professions.

Even more critically, individuals acting as trustees, whether appointed by court or voluntarily, have a legal duty to be aware of the nature and effect of the trust agreement. Trustees are expected to understand their legal obligations, the structure of the trust, and the property held within it. This fiduciary responsibility extends beyond the administration of the trust itself and includes awareness of any tax implications that may arise when the trustee acts in a personal capacity, such as when purchasing property. Where a trustee fails to disclose a trust interest that could affect SDLT treatment, they may be deemed negligent, even if acting in good faith.

This highlights a broader issue which is that conveyancers can only act on what they are told. A buyer who omits material information, such as a role in a trust that holds residential property, risks incorrect SDLT treatment and exposure to penalties, regardless of their interest.

Conclusion

The Angela Rayner case has brought public attention to a corner of tax law that can have substantial consequences. The SDLT deeming rules are not concerned with fairness or intent; they apply automatically and without exemption. Legal and tax professionals advising on family trusts, particularly involving minors or disabled beneficiaries, must have a working knowledge of these provisions, and importantly, trustees, especially as the buyer of a residential property, must be aware of the need to disclose any interest (direct or deemed) in other properties, including trust-held ones to their conveyancers.

As the Rayner case shows, the cost of oversight is not just financial, but reputational.

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The Winter Budget is Coming: Speculation, speculation and more speculation

With the Autumn (although arguably Winter) Budget confirmed for 26 November 2025 and with the Chancellor Rachel Reeves under ever-growing pressure to address a significant fiscal gap (estimated at around £20–£40 billion), speculation is growing unabatedly and somewhat exhaustingly! While Labour maintains its manifesto pledge not to raise income tax, VAT, or National Insurance on working people the Government appears (through ongoing media speculation) to have inheritance and property in its crosshairs to plug the shortfall. 

Potential changes on the horizon

So, given the constant fiscal newsfeed and the potential urgency, we have waded through the media speculation to present the key potential changes to look out for in the private client space:

Inheritance Tax (IHT)

In this Budget, we may see an announcement of a lifetime cap on tax free gifts, limiting the total amount that can be passed on exempt from IHT, even if the donor survives seven years. Possibly, instead of or in addition to this, we may see an extension of the so-called ‘seven-year rule’ to ten years, which would align conveniently with the latest IHT changes introduced on 6 April for Long-Term Residents.

Stamp Duty Land Tax (SDLT) Overhaul and Mansion Tax

Reports in various media outlets suggest a radical overhaul of SDLT, including:

• Replacing upfront SDLT with a proportional ‘national property tax’ on homes over £500,000; and
• Introducing a ‘mansion tax’ or wealth-based levy on high-value properties (possibly above £1.5 million or even £2 million).

How this applies to non-residents and owners of additional properties remains to be seen, but we would expect some form of surcharge to remain to dissuade overseas buyers from accumulating too much UK property.

Capital Gains Tax (CGT) on Primary Residences

This may shock many but the exemption on gains from selling primary residences could be removed for high-value properties, with speculation that this would apply to properties valued over £1.5 million with CGT kicking in at the excess of this.

National Insurance on Rental Income

The Government is considering subjecting private landlords’ rental income to NIC (potentially an 8% lev) affecting individual and partnership income.

What can be done?

Without wanting to dive into complex prose not turn this into an opinion piece, I will keep this punchy in the interests of time.

The key takeaways are as follows:

• Review assets in the next two months and establish (with the assistance of both lawyers and financial advisors) what assets can be gifted; and
• Consider any upcoming property transactions and establish whether to accelerate or delay pending the outcome of the Winter Budget and further clarity on SDLT reforms.

If you have any queries relating to Inheritance Tax and gifting, please contact Ben Rosen of Quastels LLP.

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Inheritance Tax: Successive Reforms to Succession

What can we expect?

According to The Guardian, the Labour Government is looking to introduce further changes to UK inheritance tax. These changes would represent a further squeeze on planning opportunities available to families, following the abolition of the non-dom regime (2025), reforms to agricultural and business property relief (2026), and bringing pensions into chargeability (2027). With these successive yearly reforms, do we have further reforms on the horizon and how might they impact succession plans?

Turning to the latest attempt by the Treasury to gauge public sentiment, ministers are considering introducing:

1. a lifetime cap on gifting; and
2. changes to taper relief that reduces IHT rates on gifts made between three and seven years before death.

Under the current rules, any gift (of whatever amount) made more than seven years before death is typically exempt from IHT. As for taper relief, the rate of tax levied on gifts within that seven year period ranges from 32% down to 8%. In effect, the longer you live, the more you and your heirs are rewarded.

We can only speculate for now, but might a lifetime cap apply to the donor or the donee. For example, might there be a lifetime gifting cap of £1 million to be applied across any number of beneficiaries and once that £1 million cap is hit (even if distributed among, say, 15 recipients), an immediate tax charge arises, much like a gift tax? Or, would the Government look to apply a cap on each donee (or recipient) of, say, £100,000. If this amount is exceeded, then again, it triggers a lifetime gift tax on the excess.

Beyond the speculation, with the Government exploring a range of options (including a wealth tax) to help overturn their £40 billion hole, the reality for clients is that traditional planning might soon be severely curtailed.

What to do?

If introduced, the new cap could squeeze succession and tax planning further, resulting in far greater tax liabilities and possibly the sale of assets if gifting in delayed. Combined with the reforms to APR and BPR, delayed gifting could lead to the fragmentation of family ownership of assets and businesses. A potential reform to taper relief might add insult to injury, whatever form this ends up taking.

There are, of course, other considerations to gifting including potential capital gains tax implications and the loss of control, so gifting may be as much of a psychological burden to overcome as well as one that is fiscal in nature. Given the capital gains tax element, there is always the risk of double taxation which is perhaps its own standalone article.

When should we act?

Lawyers typically answer with ‘it depends’. However, with the ongoing erosion of IHT reliefs, the time is NOW. Don’t wait until the Budget, as there will likely be anti-forestalling rules preventing you from acting once there’s ‘clarity’ means it’s too late by then.

Client’s should therefore look to:

1. Maximise current exemptions: Gifts made today under the current system still benefit from full taper relief and the seven-year exemption window;
2. Use every available relief: Annual exemptions (e.g., £3,000 per year), ‘gifts from surplus income’, wedding gifts, and small gifts are still intact, but these may become more restricted with anticipated reforms;
3. Avoid being caught off guard: Future reforms may apply retrospectively to gifts made after certain dates or impose cumulative limits such that any delay could further erode your ability to gift tax-efficiently.

In summary

If you have assets you can afford to gift, there is no time like the present. The Guardian article is a warning of what is to come and so clients should act with certainty of the current system noting that there is a window of time before any future reforms become law.

If you have any queries relating to inheritance tax and gifting, please contact Ben Rosen of Quastels LLP.

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