Beware the stamp duty trap on a granny annexe

Cold weather and risks of snow and ice often have us concerned about our elderly relatives. One way to keep them safe is to keep them close, and buying a property with a ‘granny annexe’ is a popular solution. However, the 2016 (complicated!) changes to Stamp Duty Land Tax (SDLT) have left some buyers in the dark about what the tax implications of buying a property containing a granny annexe (or any type of secondary dwelling) might be.

Ordinarily, if the home you buy is your only property, or is replacing your main dwelling, standard SDLT charges would apply. When the new rules came into play in 2016, a granny annexe was seen as an additional property, therefore throwing the whole purchase into the additional 3% SDLT bracket. However, the Government decided that this was not fair, and made amendments to the Finance Act on 15 September 2016.

Amended Finance Act

The amendment introduced a new test which applies to cases where two or more dwellings are being purchased in a single transaction – including properties with a granny annexe.

The 3% additional SDLT will NOT apply so long as you satisfy the following:

  • At least two-thirds of the overall price is attributed to the main dwelling
  • The secondary dwelling (or granny annexe) forms part of the same building as the main dwelling OR is within the grounds of the main dwelling.

The reality is that the secondary dwelling can be used for anything, as there are no rules about how it is occupied, or around how you can sell or dispose of it. You could, for example, choose to rent it privately rather than have a family member live in it.

If you would like any advice about purchasing or selling a property with multiple dwellings, or have any other residential property questions please contact Helen Harris, head of the residential property department at Forrester Sylvester Mackett on 01225 755621.

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The contents of this article are for the purposes of general awareness only.  They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.   Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.