If you’re planning on buying a property, you should learn from the former Deputy Prime Minister Angela Rayner’s tax problems to avoid making the same costly mistakes.
In September, the Deputy Prime Minister and Housing Secretary found herself in hot water after it was discovered that she owed £40,000 in Stamp Duty Land Tax (SDLT).
Here’s what homebuyers should know about the Stamp Duty situation, to prevent getting caught out the same way when buying a new home if you still own another property.
Why did Angela Rayner underpay Stamp Duty?
The former Deputy Prime Minister had sold interest in her first home in Ashton-under-Lyne to a trust to benefit her child, before buying a new apartment in Hove.
However, according to Paragraph 12 of Schedule 4ZA of the Finance Act 2003, Rayner would still be considered an owner of the property for SDLT purposes. Since Rayner did not follow guidance to seek expert tax advice, she did not know this, and underpaid SDLT as a result.
Rayner must now pay the £40,000 owed and may also face a fine of up to £12,000 for carelessness.
This is due to a 3% surcharge introduced by the Conservative government in the 2015 Autumn Budget, which was increased to 5% in the 2024 Autumn Budget. The legislation was designed to discourage people from purchasing second homes or buy-to-let properties while first-time buyers are struggling with the pressured housing market.
To ensure that buyers pay extra SDLT if they already own a residential property on the day they buy another one, the legislation closed loopholes like using trusts or companies to shift ownership.
This is why Rayner owed extra tax and will face financial penalties, which could have been avoided if she had consulted a tax expert who would have explained her full tax liabilities.
Consult a professional tax adviser on SDLT
There are several lessons to be learned from Rayner’s very public tax blunder, but most important is the reminder that you should always seek professional tax advice before committing to a purchase or sale to ensure you know how much tax you’ll have to pay.
The government’s Stamp Duty Land Tax guide is available online, but it’s better to be safe than sorry when it comes to understanding tax rules for property buyers.
So, if you need to speak to a tax adviser whose judgement you can trust, be sure to get in touch with our accountants in Barnsley for guidance on SDLT and asset taxes.
You can reach us by calling 01226 298 298 or sending an email to info@gbac.co.uk.