What was the tax issue that led to Angela Rayner’s resignation?

When the then deputy prime minister bought a flat in Hove with her partner in April 2025, she paid the standard rate of stamp duty – £30,000 – on the £800,000 transaction.

That purchase was part-funded by the proceeds of selling her 25% share in the family home, in her constituency of Ashton-under-Lyne, to a trust set up in the name of her disabled son. The trust had been created by court order years earlier, after her son was awarded damages due to a medical incident when he was a baby.

After a series of press stories revealed that the Ashton-under-Lyne property was owned by her son’s trust, however, Rayner took additional legal advice, and accepted that she should have paid the higher rate of stamp duty, £70,000, levied on second homeowners.

She also conceded that she should have taken advice from a tax specialist during the purchase – an omission the prime minister’s ethics adviser Laurie Magnus described as, “deeply regrettable”.

What was HMRC investigating?

Rayner’s lawyer says that HMRC has been satisfied throughout its inquiry that she did not engage in deliberate tax avoidance.

However, the authorities were looking at two questions: whether she should in fact have been liable for the higher rate of stamp duty as effectively a second homeowner; and whether she was “careless” in arranging her tax affairs – a finding that could have led to her being hit with a fine of £8,000.

What decision did the tax inspectors reach?

HMRC did not find her to be careless in the way she approached the transaction – including the fact that she did not seek specialist tax advice, instead relying on her conveyancer – and therefore levied no penalty. But it nevertheless found she was liable for the higher rate of stamp duty.

Rayner had commissioned the opinion of a KC, Graham Aaronson, who argued that HMRC was relying on too strict an interpretation of the law, and Rayner should in fact have paid the standard rate.

In particular, he pointed to paragraph 12 of Schedule 4ZA of the Finance Act 2003. This makes a special exception to the usual assumption that when a child owns a home, their parents in effect own it, for situations in which a trust has been set up for the benefit of a disabled child.

The paragraph’s specific wording says the exemption applies to trusts appointed by the court of protection, under the provisions of section 16 of the Mental Capacity Act 2005.  That doesn’t apply to Rayner’s son’s case, but her lawyers had argued that the intention when the law was made, was for it to apply more widely, including to children with disabilities such as her son’s.

What has the shadow chancellor, Mel Stride, got to do with it?

Stride introduced the trust exemption to the finance act in the House of Commons, when he was a Treasury minister. Rayner’s lawyers quote his words at the time, that paragraph 12 would provide, “help … in relation to the interests of disabled children where a court appointed trustee buys a home for such a child”.

They claim this appears to include cases like Rayner’s, and thus supports their argument that the provision was meant to have wider application than its wording strictly implies.

What will she have to pay?

Rayner’s lawyers claim she would have had a realistic chance of success if she had contested HMRC’s decision in court.

But HMRC has made clear that it would contest such a case, which would be a lengthy process, involving several levels of appeal – certainly lasting well beyond the duration of any potential Labour leadership race.

Rather than appeal, then, Rayner has unsurprisingly opted to accept HMRC’s assessment, and paid the £40,000 additional stamp duty it found that she owed.

Where does this leave Rayner?

No longer burdened by an ongoing HMRC investigation, and free of any additional fine, Rayner will feel free to play a full role in any leadership challenge to Keir Starmer.

Her lawyers’ detailed argument against HMRC may also allow her to claim that the tax authorities were not acting within the spirit of the law, though the fact that she will now pay the higher, £70,000 rate of stamp duty on her Hove flat is likely to be the most salient fact to voters following the case.