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‘Granny flat’ exempt from SDLT surcharge

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Annexes for older relatives (colloquially known as “granny flats”) will be exempt from the new stamp duty land tax (SDLT) when applied to purchasing a second home.

The government announced the change following the introduction of a 3% SDLT surcharge on additional property sales, but will reconsider the rules in the upcoming Finance Bill in July for anyone buying a home that includes a qualifying annex.

Any annex that is valued at less than one third of the total property value will no longer qualify for the extra charge.

New rates for SDLT on purchases of additional residential properties such as second homes and buy-to-let properties came into force on 1 April 2016. 

The higher rates will be a 3% surcharge above the current SDLT rates:

Thresholds Existing SDLT rates New SDLT rates
£0 – £125,000 0% 3%
£125,001 – £250,000 2% 5%
£250,001 – £925,000 5% 8%
£925,001 – £1,500,000 10% 13%
Over £1,500,000 12% 15%

David Gauke, the financial secretary to the Treasury, told the House of Commons:

“I have been made aware that the Bill as drafted might lead to some main houses with an annexe for older relatives attracting the higher rates of SDLT intended to apply to additional properties.

“I am happy to reassure the House that that is not our intention and the government will table an amendment in Committee to correct the error and ensure fair treatment for annexes”

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