Q&A Will buying a property with a Granny Annex incur higher Stamp Duty/Land Tax?

Q:        We are planning to buy a bigger house and have my elderly parents to live with us. We have looked at some properties that already have a ‘Granny Annex’, which would save us having to do work to split the property, meaning we could all sell and move at the same time. However, I am concerned that such a property would be classed as a multiple dwelling and therefore attract additional Stamp Duty/Land Tax. Is this the case?

A:        Yes, a higher rate of SDLT is applicable to the purchase of a multiple dwelling. A multiple dwelling is defined as one which consists of a main dwelling, together with a separate dwelling which may or may not be attached to the main dwelling. The separate dwelling must have its own lockable front door, and a bathroom and kitchen area with ‘facilities for basic domestic living needs’.

However, you could qualify for Multiple Dwellings Relief. This would mean that instead of having to pay SDLT on the total purchase price of the main property plus its annex, the SDLT would be calculated in a different way, which could result in you paying less SDLT than if you purchased the property as a single dwelling and then split it into two.

The calculation for MDR divides the total purchase price by the number of dwellings included in the sale (in your case this would be 2 dwellings) and then applies SDLT on the average property price before multiplying that figure by the number of dwellings purchased. So, let’s say you paid £1,000,000 for a single dwelling, then the SDLT would be £71,250. But if you paid the same price for a main house with a Granny Annex and claimed MDR, the SDLT would only be £55,000.

The key is proving whether a property qualifies for Multiple Dwellings Relief, so seeking professional advice to determine this and ensure that relief is applied correctly is essential.

This question has been answered by Clare Lewis, a Licensed Conveyancer with GHP Legal.  If you would like to speak to someone about this or any other legal matter, please visit our website www.ghplegal.com and use the contact us form, or call us on: Wrexham 01978 291456, Llangollen 01978 860313, Oswestry 01691 659194 

Clare Lewis

Clare Lewis

Licensed Conveyancer

Licensed Conveyancer in our Wrexham office.