Does being a beneficiary of a bare trust stop you being a first-time buyer for SDLT?

Introduction

This is a common Stamp Duty Land Tax question. A person may never have bought a home in their own name, but may previously have had an interest in a dwelling through a trust. They then want to know whether they still qualify for first-time buyer relief when buying a home, either alone or with a partner.

The issue matters because first-time buyer relief depends on whether the buyer has previously been a purchaser of a major interest in a dwelling. In bare trust cases, SDLT law can treat the beneficiary as owning the interest held by the trustee. Since the rules were tightened from 6 March 2024, this point has become even more important.

The Question

A buyer is purchasing their first home jointly with a partner. Before this purchase, the buyer was a beneficiary of a bare trust which held a residential property. That property has now been sold, the trust has ended, and the buyer received less than £40,000 as their share of the proceeds.

The buyer wants to know whether they are still a first-time buyer for SDLT purposes, especially given the March 2024 changes to the trust rules.

Nick’s Explanation

Nick’s view was that the earlier interest under the bare trust prevents first-time buyer relief from applying.

In summary, his reasoning was:

• Schedule 6ZA to the Finance Act 2003 defines a first-time buyer as someone who has not previously been a purchaser in relation to a land transaction whose main subject matter was a major interest in a dwelling.
• Under Schedule 16 to the Finance Act 2003, where property is acquired by a bare trustee, SDLT generally treats the interest as vested in the beneficiary.
• That means the beneficiary is treated as having owned the same major interest, even though legal title stood in the trustees’ names.
• The March 2024 amendment removed a narrow bare trust lease exception, making the position stricter from 6 March 2024.
• The amount received on sale, including whether it was less than £40,000, does not decide first-time buyer status.

As Nick put it in substance, the beneficiary’s equitable share under the bare trust counts as a previous acquisition of a major interest, so paragraph 6(1) of Schedule 6ZA prevents first-time buyer relief. He also noted that the £40,000 figure is relevant to the higher rates for additional dwellings, not to first-time buyer relief.

The Law

The main statutory source for first-time buyer relief is Schedule 6ZA to the Finance Act 2003.

Paragraph 6(1) says:

“In this Schedule ‘first-time buyer’ means an individual who—

(a) has not previously been a purchaser in relation to a land transaction the main subject-matter of which was a major interest in a dwelling…”

So the key question is whether the person has previously been a purchaser of a major interest in a dwelling.

For trust cases, Schedule 16 to the Finance Act 2003 is critical. Paragraph 3 provides:

“Where a person acquires a chargeable interest as bare trustee, this Part applies as if the interest were vested in, and the acts of the trustee were the acts of, the person or persons for whom he is trustee.”

This is often called a look-through rule. For SDLT purposes, the bare trustee is largely ignored and the beneficiary is treated as the person holding the interest.

The law was tightened by Finance (No. 2) Act 2024, which inserted paragraph 3A into Schedule 6ZA. That provision says:

“In determining who is the purchaser for the purposes of paragraphs 1(4) and 2(2), paragraph 3 of Schedule 16 is to have effect as if sub-paragraphs (2) and (3) were omitted.”

This removed a narrow carve-out that had previously helped in some bare trust lease situations. From 6 March 2024, that exception no longer applies.

Relevant HMRC guidance appears in SDLTM29861 and SDLTM31720.

Analysis

The analysis can be broken down into a few steps.

1. First, ask whether the earlier trust property involved a major interest in a dwelling. If the trust held a residential freehold or a qualifying leasehold interest, that will usually be a major interest.

2. Second, ask whether the buyer is treated as having been the purchaser of that interest. In a bare trust, paragraph 3 of Schedule 16 generally treats the beneficiary as if the interest were vested in them.

3. Third, apply paragraph 6(1) of Schedule 6ZA. If the buyer has previously been treated as a purchaser of a major interest in a dwelling, they are not a first-time buyer for SDLT purposes.

4. Fourth, consider whether the March 2024 changes assist. In practice, they do not help here. The change removed a narrow exception rather than creating a new route to relief.

5. Fifth, separate first-time buyer relief from the higher rates for additional dwellings. These are different rules. The familiar £40,000 threshold belongs to the higher rates regime. It does not create first-time buyer status and does not preserve it.

That means a person can fail to qualify as a first-time buyer even if their earlier trust interest was worth less than £40,000. The value point is simply not the test for first-time buyer relief.

Where the new purchase is a joint purchase, all purchasers must satisfy the first-time buyer conditions for the relief to apply. So if one buyer fails the test because of a previous major interest through a bare trust, the joint purchase does not qualify for first-time buyer relief.

That does not automatically mean the 5 percent higher rates apply. Those rates depend on a different test, including whether the buyer owns another relevant dwelling interest at completion and whether any interest falls within the statutory thresholds and rules for the surcharge.

Outcome

If a person previously had a beneficial interest in a dwelling through a bare trust, SDLT usually treats that as a previous acquisition of a major interest in a dwelling. As a result, that person is not a first-time buyer for the purposes of Schedule 6ZA to the Finance Act 2003.

If they are buying jointly, the purchase will also fail to qualify for first-time buyer relief.

The fact that the trust has since been wound up, the property has been sold, or the person received less than £40,000 does not restore first-time buyer status.

However, if neither buyer owns another residential property at completion, the purchase may still be charged at the ordinary residential SDLT rates rather than the 5 percent higher rates.

Practical Steps

If you are in this position, it is sensible to work through the following points carefully:

• Confirm whether the earlier trust was in fact a bare trust, rather than another type of trust.
• Check what interest the trust held in the dwelling, for example freehold or leasehold.
• Identify whether that interest was a major interest for SDLT purposes.
• Review whether you were beneficially entitled under the trust at the time the property was acquired or held.
• Consider the completion date of the new purchase and apply the post-6 March 2024 rules if relevant.
• Keep separate the first-time buyer relief question from the higher rates question.
• Ask your conveyancer or SDLT adviser to analyse the position by reference to Schedule 6ZA, Schedule 16, and HMRC’s current manual guidance.

If there is any uncertainty about whether the trust was truly a bare trust, or about the nature of the earlier interest, that detail can materially affect the SDLT answer.

Conclusion

For SDLT, a beneficiary under a bare trust is generally treated as owning the dwelling interest held by the trustee. That means a previous bare trust interest in a residential property will usually stop the beneficiary from qualifying as a first-time buyer. The March 2024 changes did not relax that position; they made the rules tighter in this area.

Legal References Used

• Finance Act 2003, Schedule 6ZA, especially paragraph 6(1)
• Finance Act 2003, Schedule 16, especially paragraph 3
• Finance (No. 2) Act 2024, inserting paragraph 3A into Schedule 6ZA
• HMRC Stamp Duty Land Tax Manual, SDLTM29861
• HMRC Stamp Duty Land Tax Manual, SDLTM31720

This page was last updated on 22 March 2026.

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