Multiple Dwelling Relief Changes
New Stamp Duty Changes Could Impact You
Multiple Dwelling Relief changes being bought in during June 2024 will see the abolishment of Multiple Dwellings Relief (MDR). MDR has provided reduced Stamp Duty for those buying two to five properties and has been a saving grace for homeowners buying properties with an annexe. These self-contained ancillary living spaces traditionally counted as two dwellings, but will now face double Stamp Duty.
A Recap
Previously, MDR recognised properties with annexes as separate dwellings for stamp duty purposes, provided they met specific criteria. This meant a lower overall tax burden when buying. So let’s say you were buying a house with a qualifying annexe. You wouldn’t pay stamp duty on the entire value; it would be calculated on the main house and the annexe separately, often leading to significant savings.
What it Means for You
With MDR being scrapped, those purchasing properties with annexes to look after elderly relatives will no longer benefit from tax relief, incurring double stamp duty land tax bills.
The new rules would hit families looking to move in together and look after their elderly relatives.
A buyer of a property that costs £500k could result in an extra £12.5k stamp duty.
What Can You Do?
Here are some steps to consider if you’re planning to buy a property with an annexe:
Buy Before April 2024: If feasible!
The rule change will apply to transactions with an effective date on or after June 1st.
Speak to a Stamp Duty Advisor:
A professional can assess your specific situation and advise on potential tax liabilities.
Focus on the Benefit of the Annexe to your family:
While the stamp duty change might add a hurdle, focus on the value the annexe brings – independent living space for family members, potential rental income, etc.
Build your own Annexe rather than buying a property with one:
This option we feel is the better one. Find a cheaper property with enough garden space to accommodate an annexe, then build your own. This will circumvent the extra stamp duty charge.
Consider siting a mobile home instead of a permanent annexe
Given the abolishment of Multiple Dwelling Relief (MDR), those looking for additional living space on their property might want to consider a Mobile Home instead of an annexe. With MDR, stamp duty for secondary dwellings was calculated at a lower rate. Now, it can significantly increase the overall cost. This means that a mobile home certified under the Caravan Act could be a more tax-friendly option. As it wouldn’t be considered a permanent structure for stamp duty purposes.
Remember, it’s always wise to consult a professional to check that a mobile home on your property qualifies under the Caravan Act. Read more about the Caravan Act here, click on the link to our blog on that topic below or call us on 01285 283200.
Navigating the Change with NAPC
At NAPC, we understand the complexities surrounding granny annexes. We can help you navigate the upcoming changes and provide assistance if you are looking to buy a property with a view to building an annexe.
Further reading
For more blogs packed with information about planning regulations, and hints and tips on getting your application right first time, head over to our blog section, or click below to find out more on these hot topics! To read about the abolition on the gov.uk website, click here.
