Why Does It Always Rayn on ’Er?

With the Budget fast approaching and rumours swirling about new taxes on rental income and even capital gains on main residences, Angela Rayner’s latest tax scrape couldn’t have come at a worse time for the government.

Her resignation over a £40,000 stamp duty error is a sharp reminder that complex property transactions demand specialist tax advice.

And while the political fallout is headline news, the underlying mistake offers valuable lessons for anyone dealing with property and trusts.

What happened?

When Rayner bought her £800,000 Hove flat in May, she paid standard stamp duty. She believed that because her previous home had been transferred into a trust for her disabled son, it no longer counted as hers for stamp duty purposes. Unfortunately, HMRC doesn't see it that way. The rules "look through" the paperwork and still treat her as owning the old property. That triggered the 3% second property surcharge, leaving her £40,000 short and, ultimately, without a Cabinet job.

An independent ethics inquiry found that while she acted in good faith, she failed to meet the standards required for government ministers. Earlier today, she resigned from her positions as Deputy Prime Minister, Housing Secretary, and Deputy Leader of the Labour Party.

Why it's understandable

If you were in her position – financial, not political – you'd probably assume the same.

Your name isn't on the deeds, you've transferred the property into a trust, surely you're clear?

It feels logical. But tax law often ignores what feels logical.

A simple parallel most people miss is with children's savings accounts.

If a parent puts money in and the child earns more than £100 a year in interest, HMRC taxes the parent, not the child. Even though the account is in the child's name, the law "looks through" and treats it as the parent's.

Most people have no idea that rule exists. Rayner's stamp duty problem follows the same principle: the rules don't always respect the paperwork.

Could she have avoided it (legally!)

From what's been reported, the property was placed into what's known as a bare (or absolute) trust. That means the beneficiary – in this case her son – is absolutely entitled to the asset, usually from age 18. It's straightforward, but it offers limited long-term protection, particularly for someone with disabilities.

Had the trust been structured differently – for example, as a discretionary trust – the stamp duty position may well have been different. In that case, the Hove flat might have been treated as Rayner's only property, meaning no surcharge. Same intention, different structure, totally different outcome.

Why choose a bare trust then? I suspect it was partly so that her son could one day benefit from principal residence relief on any capital gain if the property was sold. But we don't know the extent of his disabilities or the family's wider thinking. From a planning point of view, placing cash into a discretionary trust and investing in a well-diversified portfolio could have been a simpler and more flexible route.

Bad decisions aren’t unique to Rayner.

I’ve had clients ask about gifting property to their children to sidestep inheritance tax or avoid care fees. On paper it can seem like common sense.

In practice, though, it can bring in tax law provisions such as the “gift with reservation” rules or the pre-owned asset tax, both of which can have adverse consequences. Beyond the tax, you’re also handing control away – which can backfire if your child divorces, dies, or simply refuses to co-operate when you want to downsize.

In general, I find that, like oil and water, trusts and property don’t mix well.

Get advice early

That's the real lesson here. Even senior politicians with access to government legal advisers can get caught out. Transactions that look straightforward often have hidden traps. A conveyancer or general lawyer may deal with the paperwork, but tax advice is its own specialism. When tens of thousands of pounds are at stake, belts-and-braces advice is cheap insurance.

The ethics report noted that Rayner's initial advisers acknowledged their advice didn't constitute expert tax guidance and suggested she seek specialist advice. Had she done so earlier, the higher stamp duty rate would have been identified from the start.

Conclusion

Rayner's resignation demonstrates how costly tax mistakes can be, not just financially, but professionally. Her error was understandable given the complexity of the rules, but specialist advice could have prevented both the £40,000 bill and the end of her ministerial career.

Whether you're buying property, setting up trusts, or planning for inheritance tax, the message is clear: when significant sums are involved, proper tax advice isn't just helpful, it's essential.

It’s likely we haven’t seen the last of her in government, but for now, while in Brighton the sun may be shining, she could not avoid the lightning.

RAYNER DISCLAIMER!

This article is for general information only and does not constitute personal tax advice. Tax rules can change and their application depends on individual circumstances. Always seek professional advice for your specific situation.