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Stamp Duty Land Tax (SDLT) and the ‘Granny Annexe’

Luke McMath

Partner Luke McMath, in our Residential Property team, comments on the complex area of  Stamp Duty Land Tax (SDLT) for properties with a separate annexe.

We have recently been advising clients who have been purchasing a property with a separate area, wing or building. This is quite commonly an annexe where other family members have lived.

This is a complex area in terms of declaring the correct Stamp Duty Land Tax (SDLT) which is payable on such an acquisition. On top of the standard SDLT rules there are two additional factors which need to be considered:

  1. Whether an additional 3% SDLT is payable as a result of the recent law change bringing in a higher rate of SDLT for second properties.
  2. Whether the property could benefit from multiple dwelling relief which typically greatly reduces the overall SDLT payable.

The correct result is highly dependent on the facts of the individual situations but can include:

  1. The “property” is for this purpose simply a single property and SDLT is payable on the purchase price in the usual manner.
  2. The “property” is treated as two properties for SDLT purposes and an additional 3% of SDLT is payable on the entire purchase price of “both” properties.
  3. Although the property would be treated as two properties for SDLT purposes, it falls within specific exemptions given for a granny annexe and similar separate areas and is treated as a single property for SDLT purposes and SDLT is paid in the usual manner.
  4. On each of the previous two cases, the property may or may not benefit from multiple dwelling relief dependent on a separate list of criteria.

In some cases, special rules for mixed use properties will need to be considered. If six or more dwellings are being purchased then different options may also apply.

For more information or legal advice, please contact Luke McMath or a member of our team.

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.