Summary:
The 3% higher rate can apply even if you don’t directly own another property, but benefit from one through a trust.
Family arrangements, such as trusts for children or shared living spaces, need careful review before buying another home.
Relying solely on standard legal or conveyancing advice is risky if your situation is unusual or involves trusts.
The responsibility for paying the correct SDLT always rests with the buyer, not the adviser.
How Trusts and “Beneficial Interests” Can Trigger the 3% Surcharge
The 3% higher rate isn’t just for people who own two or more homes in their own name. It can also apply if you have a “beneficial interest” in another property—even if that property is held in a trust.
What is a “Beneficial Interest”?
A beneficial interest means you have the right to benefit from a property, even if you’re not the legal owner. This could include:
The right to live in the property
The right to receive income from the property (like rent)
The right to a share of the property’s value
If you have any of these rights through a trust, you may be treated as owning the property for stamp duty purposes.
Types of Trusts and How They Affect SDLT
Bare Trusts:
If you are the beneficiary of a bare trust, you are treated as the owner for SDLT. Any property held for you in a bare trust counts as your property.
Interest in Possession Trusts:
If you have a right to live in or receive income from a property held in trust (sometimes called a “life interest”), you are treated as having a beneficial interest. This can trigger the 3% surcharge if you buy another property.
Considerations
If you’re thinking about using a trust to protect family property or help with inheritance planning, it’s important to understand how stamp duty land tax (SDLT) works. Many people are caught out by the 3% higher rate surcharge, which can apply even if you don’t directly own another home—just having a certain kind of interest in a property held in trust can be enough.
The recent case involving Angela Rayner, a senior politician, has shown how easy it is to get this wrong. Even with legal advice, she ended up underpaying stamp duty because of the way her family home was held in trust for her child. This article explains, in plain English, when the higher rate applies, what counts as an “interest” in a property, and what you need to watch out for if you’re involved with trusts.
What is the 3% Higher Rate Surcharge?
When you buy a residential property in England or Wales, you usually pay SDLT based on the price. If you already own another residential property, you’ll often have to pay an extra 3% on top of the standard rates. This is known as the “higher rates for additional dwellings.”
But it’s not just about properties you own in your own name. The rules also look at whether you have a “beneficial interest” in another property—including some interests held through trusts.
Discretionary Trusts:
If you are only a potential beneficiary (with no guaranteed right to occupy or receive income), you are usually not treated as having a beneficial interest for SDLT. However, if you do have a present right to benefit, the surcharge may apply.
Family Members and Special Rules
If your minor child is a beneficiary of a trust property and you live with them, you may be treated as having an interest in that property.
If your spouse or civil partner has a beneficial interest in a property, you are usually treated as having that interest too for SDLT purposes.
Why did Angela Rayner resign as Deputy PM and Home Secretary over stamp duty chargers?
Angela Rayner sold her share in her family home to a trust set up for her disabled son. She believed this meant she no longer owned another property and paid the standard rate of stamp duty when buying a new flat. However, because of the way the trust was set up and the rights her family had to live in the original home, the rules meant she was still treated as having an interest in that property. As a result, she should have paid the 3% surcharge on her new flat.
Facts of her case:
Angela Rayner’s son received compensation following birth complications that left him with lifelong disabilities.
A court directed that a trust be set up to manage this compensation and hold the family home for her son’s benefit.
Rayner sold her share of the home to the trust, so her name was removed from the property deeds.
Despite this, the family continued a “nesting” arrangement: the children, including her disabled son, lived in the home full-time, while Rayner and her ex-husband took turns staying there to care for them.
This meant Rayner still had the right to live in and benefit from the family home, even though she was no longer the legal owner.
She used the proceeds from the sale to buy a new flat, believing she no longer owned another property and paid only the standard rate of stamp duty.
However, because the trust allowed her and her family to keep living in the original home, the law treated her as still having a beneficial interest in it.
As a result, she should have paid the 3% higher rate stamp duty on her new flat.
This case shows that even with legal advice, it’s easy to get caught out if the full details of the trust and family arrangements aren’t considered.
Real-Life Examples and Lessons from the Angela Rayner Case
Understanding how these rules work in practice can help you avoid expensive mistakes. The Angela Rayner case is a good example of how complicated family arrangements and trusts can unexpectedly trigger the 3% surcharge.
Example 1: The Family Home in a Trust
Imagine you sell your share of the family home to a trust for your child, who is under 18. You use the money to buy a new flat. Even though your name is no longer on the old home, if you or your child can still live there, or if you benefit from the trust, you may be treated as having an interest in that property. If you then buy another property, the 3% surcharge could apply.
Example 2: The Holiday Home Purchase
Suppose you are a trustee and a beneficiary of a trust that owns a property. If you decide to buy a holiday home, HMRC may count your interest in the trust property as owning another home. This means you’ll pay the higher rate on your new purchase.
Pitfalls, Challenges, and Practical Steps: What Buyers and Families Need to Know
Common Pitfalls
Assuming “No Legal Ownership” Means No Surcharge:
Many people think that if their name is not on the property deeds, they are exempt from the 3% SDLT surcharge. However, the law looks at “beneficial interests”—so if you, your spouse, or your minor child can benefit from a property held in trust, you may still be liable for the higher rate.Misunderstanding Trust Structures:
Trusts vary widely. Some give beneficiaries a right to occupy or receive income (an “interest in possession”), while others only provide a potential future benefit. Failing to clarify the exact nature of your or your family’s rights under a trust can result in unexpected SDLT liabilities.Relying Solely on Conveyancers for Tax Calculations:
Conveyancers are responsible for handling the legal process of property transfer and for submitting the SDLT return. However, most are not tax specialists and will state in their terms that they do not provide tax advice. If you do not disclose all relevant information—such as trust arrangements or family interests—they may not spot issues that trigger the higher rate. The responsibility for correct disclosure and payment remains with you as the buyer.Overlooking Family Member Interests:
SDLT rules can attribute a property interest held by your spouse, civil partner, or minor child to you. This means that even if you do not directly benefit from a trust property, your SDLT position can be affected if a close family member does.
Challenges in Practice
Blurred Boundaries Between Legal and Tax Advice:
Recent changes mean that anyone assisting with SDLT returns—including conveyancers—may be classified as a “tax adviser” for regulatory purposes. This creates tension, as conveyancers are expected to spot potential tax issues but are not qualified to give detailed tax advice. Their role is to flag risks and recommend specialist input where needed.Disclaimers and Limitations of Service:
It is now standard for conveyancers to include disclaimers in their client care letters, making clear that they do not accept responsibility for tax advice. However, if they complete the SDLT return and do not raise obvious red flags, their conduct may still be scrutinised if things go wrong. Courts may look at whether they acted within the scope of their retainer and whether they should have referred the client for specialist advice.Complex Family and Trust Arrangements:
Modern family structures—such as blended families, “nesting” arrangements, and trusts for vulnerable beneficiaries—make it difficult to determine who has a beneficial interest at any given time. This complexity increases the risk of mistakes and underpayment of SDLT.
What You Can Expect from Each Professional:
Conveyancer:
Will handle the legal transfer of property and submit the SDLT return based on information you provide. They should ask basic questions about your circumstances but will not conduct a full tax analysis unless they have specialist expertise.Solicitor:
May provide broader legal advice, including on trusts and family arrangements. However, unless they have specific tax expertise, they are likely to recommend you seek advice from a tax specialist for SDLT issues involving trusts or complex family situations.Tax Adviser:
Will analyse your full circumstances, including trust deeds, family arrangements, and property interests, to determine your SDLT liability. They can provide a written opinion and help you avoid unexpected surcharges.
Practical Steps to Protect Yourself
Disclose Everything Upfront: Tell your conveyancer and any adviser about all trusts, family arrangements, and any rights you or your family have in other properties.
Ask Direct Questions: If you’re unsure whether a trust or family arrangement could affect your SDLT, ask for a clear answer. If your conveyancer can’t advise, insist on a referral to a tax specialist.
Keep Good Records: Maintain copies of all trust deeds, legal advice, and correspondence about property interests. This will help if HMRC ever asks questions.
Don’t Rely on Disclaimers Alone: Even if your conveyancer says they don’t give tax advice, you are still responsible for paying the correct SDLT. Take extra care if your situation is not straightforward.
Review Before You Buy: If you’re planning to buy a property and have any connection to a trust, get specialist advice before you commit. The cost of advice is usually far less than the cost of getting it wrong.
Key Lessons and Conclusion
The Angela Rayner case is a powerful reminder that property and family arrangements—especially those involving trusts—can have unexpected tax consequences. Even experienced professionals and public figures can be caught out by the 3% SDLT surcharge if they don’t fully understand how “beneficial interests” work.
The 3% higher rate can apply even if you don’t directly own another property, but benefit from one through a trust.
Family arrangements, such as trusts for children or shared living spaces, need careful review before buying another home.
Relying solely on standard legal or conveyancing advice is risky if your situation is unusual or involves trusts.
The responsibility for paying the correct SDLT always rests with the buyer, not the adviser.
What You Could Do:
Be open and thorough about your circumstances with your advisers.
Seek specialist tax advice if there’s any doubt about your interests in other properties, especially through trusts.
Keep clear records and documentation for all property and trust arrangements.
Don’t ignore disclaimers—take them as a prompt to ask more questions, not as a shield from responsibility.
Disclaimer:
This article is for general information only and does not constitute legal, financial, or tax advice. Property tax rules, including those relating to trusts and stamp duty, are complex and subject to change.
You should not rely solely on the information provided here when making decisions about property transactions or trust arrangements. Always seek advice from a qualified professional who can consider your individual circumstances.
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