Stamp duty explained as Angela Rayner faces 30% penalty for being 'careless' and underpaying tax on £800,000 seaside flat

Housing Secretary Angela Rayner has acknowledged that she failed to pay the correct amount of Stamp Duty Land Tax (SDLT) when purchasing a seaside flat in May 2025.

Ms Rayner has admitted she underpaid stamp duty on her £800,000 seaside flat, after coming under intense pressure to be more transparent about her property arrangements. Reports suggest she may have saved around £40,000 by transferring her share of a family property into a trust for her disabled son before buying the new home.

Andrew Marr, managing partner at specialist tax firm Forbes Dawson, told GB News: "Ms Rayner seems to have committed a bit of a tax clanger. She paid SDLT on the basis that she had no ownership in her Ashton-under-Lyne property. However, it was owned by a trust her minor child can benefit from. There are specific anti-avoidance rules in the SDLT legislation to treat the property as still owned by her.

"It would be interesting to know whether she really did take proper SDLT advice at the outset or whether she just paid the figure provided by her conveyancing solicitor. Conveyancing solicitors do not provide SDLT advice. This is usually specifically excluded in their engagement letters.

"If she did not, it is likely that she will face a penalty of at least 30 per cent for being careless and the penalties would be higher if she is found to have deliberately avoided the tax. She will certainly be hoping to avoid HMRC’s annual list of deliberate tax avoiders."

What is stamp duty?

Stamp Duty Land Tax (SDLT) is payable when buying residential property in England and Northern Ireland, while Scotland and Wales operate their own systems. The tax is charged in bands, with no duty due on the first £125,000 of a purchase and higher rates applied to portions of the price above that threshold.

In addition, buyers of extra properties face a five per cent surcharge, a measure originally set at three per cent before being increased in October 2024 under Rachel Reeves’s Autumn Budget.

Further changes came into effect on 1 April 2025, following the end of the pandemic-era stamp duty holiday. The surcharge applies to additional residential properties worth £40,000 or more, including holiday homes, buy-to-let investments or even a new main residence if another property is already owned.

Ownership of a share in a property also counts if that share is valued at £40,000 or more, and this rule extends to properties abroad.

The extra charge is applied across the entire purchase price. For example, on a second home costing £300,000 the five per cent surcharge alone would add £15,000 to the bill. When combined with the £2,500 standard SDLT due on a property of that value, the total tax payable rises to £17,500.

An extra five per cent is usually due if buying an additional property, although exceptions apply when a main home is being replaced. Complex arrangements, such as property held in trusts, can dramatically alter the liability - often catching buyers by surprise.

Dan Neidle, founder of Tax Policy Associates, said: "The bigger point: stamp duty is a confusing mess. The tax shouldn’t exist. The second home surcharge is daft. Why are we taxing someone who buys two £500k homes £55k (£15k + £40k), but someone who buys one £1m home £43k? Where’s the logic?”

Property commentator Kirstie Allsopp said: "I’ve always wanted everyone to understand that the so called 2nd home surcharge is a vicious little tax which catches people at the some of the most difficult stages of their life. If Angela Rayner didn’t understand how it worked then how are the rest of us supposed to?"

Mortgage and property specialists said the case highlights the need for professional advice.

David Hollingworth of L&C Mortgages said: "Stamp duty land tax has only become more complicated with the surcharge on additional property, so taking specialist tax advice becomes all the more important."

Nathan Emerson, chief executive at Propertymark, said: "You must ensure that you double-check all submitted paperwork and that all figures stated are correct and represent the true picture."

Rightmove property expert Colleen Babcock added that stamp duty is "a confusing and outdated tax in many ways, which is why we’ve called for reform to the system many times."

In a statement, Ms Rayner said she relied on legal advice at the time of purchase but has since been informed that additional liabilities apply because of the trust.

She confirmed she is working with HMRC to resolve the issue and "pay what is due".

Her case has fuelled renewed debate about whether Britain’s property tax system is fit for purpose, and whether ordinary buyers can reasonably be expected to navigate rules that even senior ministers struggle to understand.