News
Stamp Duty Land Tax and Trusts
12 Sep 2025
Stamp Duty Land Tax (SDLT) and its Welsh equivalent Land Transaction Tax (LTT) are complex property taxes. Trusts are complex legal arrangements. Put the two together and you have the recipe for a labyrinth of legal and tax headaches that can result in unexpected tax liabilities.
What is a Trust?
A Trust is a legal arrangement whereby a person (known as the Settlor) transfers an asset such as property to other individuals (known as Trustees) for them to hold on behalf of the ultimate individual(s) who are to benefit from the asset (known as Beneficiaries).
Types of Trust
There are broadly three types of trust arrangement.
- An absolute or ‘bare’ trust
- An interest in possession trust
- A discretionary trust
Each type of trust is capable of owning property, but the SDLT & LTT treatment of property purchases differ between the three, and this can lead to incorrect stamp duty returns being submitted.
Higher rates of Stamp Duty
A common area of Stamp Duty where a Trust causes particular difficulty is the higher rates for additional dwellings. This is the 5% surcharge which is levied on residential property purchases by certain entities and by individuals who already own residential property.
For example, a Trust can be set up where the beneficiary has the right to occupy a property for their life. This often happens on the death of an individual who leaves their share of the family home into Trust for the surviving spouse. Such an arrangement can trigger the higher rates for the surviving spouse if they come to purchase a property for themselves. It can also have a potential effect, in certain circumstances, on reliefs such as First Time Buyer’s relief.
Trusts for Children
Another area where Trusts and the higher rates of Stamp Duty are often overlooked is Trusts for children. Where a minor (i.e. a person under 18) is a beneficiary of certain types of Trust, it is the parent that is treated as the beneficiary and not the child. This can lead to unexpected tax liabilities when the parent comes to purchase a residential property thinking the additional dwelling surcharge will not apply, only to find that it will as they already own (or at least are deemed to own) the property held in Trust. In some cases this is not picked up at the point of purchase, but rather by HMRC after the Stamp Duty return has been submitted incorrectly. Not only will there be interest due on the underpaid tax, but penalties could be levied also.
How we can help
If you are purchasing property and have connections with a Trust, or you are one of the Trustees of a Trust purchasing a property, WR Partners has a team of dedicated Stamp Duty experts who can provide advice on this complex area to ensure you pay the correct amount of tax.
