Government U-turns on extra stamp duty for 'granny flats'

13 April 2016

House buyers won’t have to pay the extra 3% stamp duty land tax (SDLT) on certain houses with an annexe, the Government has announced.

From 1 April, new rules came into force meaning new buy-to-let properties attract an additional 3% stamp duty on top of the existing rates for homes. See New stamp duty rates take force on second home purchases for more on this.  

But speaking in the House of Commons this week, Treasury Secretary David Gauke said that he had been made aware that the current rules might lead to some main houses with an annexe for older relatives attracting the higher rates of SDLT and confirmed that this was not the government’s intention.

“We certainly do not want to discourage people who wish to create an annexe for an elderly or disabled relative, providing them with support close at hand,” he said.

What the new rules mean

What this means in reality, is that as was the case previously, there is no extra stamp duty to pay if the annexe is attached to the main property.

And now, separate annexes worth less than a third of the total property value will also be excluded from the stamp duty surcharge.

So if, for example, the main property is worth £250,000 and a separate annexe is worth £50,000, there would no extra stamp duty to pay, because the total value is £300,000 and the annexe is worth less than a third of this.

However, if the annexe is worth more than a third of the main property – for instance, the main property is worth £250,000 and the separate ‘granny flat’ is also worth £250,000, then the buyer would pay the extra 3% stamp duty on the value of the whole transaction – that is, £500,000.

Anyone who has paid stamp duty on a granny annexe worth less than a third of the total property value between now and 1 April, should contact HM Revenue and Customs (HMRC) to get a refund.

‘I’m very pleased the Government has changed its mind’

Former Communities and Local Government Secretary Sir Eric Pickles, who has been lobbying the government on this issue, tells Moneywise: “I am very pleased the government has changed its mind.

“I do not believe it was ever the government’s intention to hit these annexes with the additional stamp duty. I fully understand that in practice it might only have been a small number, but it would have caused uncertainty in the sector. These are small but valuable contributions to take care of elderly relatives or members of the family with particular needs.”

Jeremy Leaf, a former RICS chairman and north London estate agent, adds: “Common sense has prevailed: the government hadn’t thought it through and now it has had a chance to do so, it realises that it simply wouldn’t have worked.”


In reply to by anonymous_stub (not verified)

hi Please can you help me in how I go about claiming this back many thanks Sam Cox

In reply to by anonymous_stub (not verified)

I moved house 13/03/18 the house was purchase for £400,000 as there is an attached annex and the purchase included this I had to pay 3% tax ie. £10,000 stamp duty. I recently had a letter from a company suggesting I am entitled to a refund of circa £6008 do you think this is legitimate or a scam.regards, T A Wells

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