By Susie Roberts, Head of Wills and Estate Planning, Solicitor, STEP Associate

When Deputy Prime Minister Angela Rayner was reported to have underpaid £40,000 in Stamp Duty Land Tax (SDLT), the headlines weren’t about tax avoidance – they were about a trust created for her disabled son.

Rayner believed that transferring property to a trust meant she no longer owned it, and therefore paid SDLT at the standard rate on her new home. But under HMRC’s complex “deeming provisions”, she was still treated as owning the first property – triggering the higher rate of SDLT.

Tax experts suggest she could now face penalties of up to £12,000, with £8,000 considered likely for a “careless” inaccuracy. (Financial Times, The Times)

This high-profile case shows just how easy it is to fall foul of the law, even with legal advice – if that advice isn’t specialist. For families planning for a disabled child, the case is a warning: Disabled Persons Trusts (DPTs) must be structured with precision and clarity.

What is a Disabled Person’s Trust?

A Disabled Person’s Trust (DPT) is a type of trust created to provide financial security for someone who meets the legal definition of disability. When the trust qualifies under UK tax law, it receives favourable tax treatment and can help preserve the disabled person’s entitlement to means-tested benefits.

But to qualify, strict conditions must be met under:

• Schedule 1A, Finance Act 2005, and
• Section 89, Inheritance Tax Act 1984.

Eligibility Criteria: Who Can Benefit?

To qualify as a DPT:

1.The beneficiary must be a “disabled person”

A person meets this definition if they:

• Cannot manage their affairs due to a mental disorder (Mental Health Act 1983), or
• Receive qualifying benefits, such as:
  • Personal Independence Payment (PIP)
  • Disability Living Allowance (DLA)
  • Attendance Allowance
  • Armed Forces Independence Payment
  • Scottish disability assistance benefits

2. Distributions must primarily benefit the disabled person

The trust must ensure that:

• Any income or capital is applied only for the benefit of the disabled person, and
• The disabled person is either entitled to all income, or receives discretionary distributions solely for their benefit.

3. Strict limits on others

Up to £3,000 or 3% of the trust capital per year (whichever is less) may be used to benefit others, without affecting the trust’s status.

4. Trustee powers must remain aligned

The trust may include standard powers (e.g. advancement), but the primary purpose must remain the benefit of the disabled person.

Why Use a Disabled Person’s Trust?

1. Protects Means-Tested Benefits

DPT assets are disregarded when assessing entitlement to benefits such as Universal Credit or local authority care funding.

2. Inheritance Tax Advantages

• No entry, exit, or 10-year charges (unlike most discretionary trusts)
• Trust assets are part of the disabled person’s estate on death, but this is often more favourable than outright gifts

3. Income Tax and CGT Reliefs

• Trustees may opt to be taxed as if the income and gains belonged to the disabled person
• This may allow use of personal allowances and reduce overall tax liability

Pitfalls to Avoid

• Stamp Duty Trap

As Ms Rayner’s case shows, deeming rules can treat parents as owning property held in trust for a minor child, triggering higher SDLT – even where legal advice was taken.

• Complex Drafting

Failure to meet technical requirements can result in the trust being treated as a relevant property trust, with significant IHT implications.

• Registration and Reporting

Trusts may need to be registered with HMRC’s Trust Registration Service, especially if they later become taxable.

• Strict Use of Funds

Trustees must not distribute capital or income outside the permitted scope. Breaches risk losing the trust’s tax advantages.

Why Specialist Legal Advice Is Crucial

Angela Rayner reportedly obtained advice from a conveyancer and a trust lawyer – but neither were tax specialists. As confirmed by the Financial Times and The Times, both advisers recommended that she seek expert tax advice, which she did not do. That omission, even if well-intentioned, may now lead to a penalty of £8,000 or more.

The takeaway? Even with legal advice, getting it wrong is easy when trusts, taxation and property law intersect.

Need Guidance? Speak to our Private Client Experts

Disabled Persons Trusts offer invaluable protection – but only when carefully structured and administered. Whether you’re a parent, carer, deputy, or trustee, the right legal advice is essential to protect your loved one’s future.

At McHale & Co Solicitors, our Specialist Private Client Team advises on the creation and structuring of Disabled Persons Trusts; works with accountants and tax advisers where required; and supports trustees with compliance, administration, and reporting. Get in touch with our team today on 0161 928 3848 or email mch@mchaleandco.co.uk to find out how we can tailor our support to your needs.