Posted on 18th April 2016

What New Stamp Duty Rules Mean for the 'Granny Annexe'

The so-called granny annexe has soared in popularity in recent years, with a growing number of homeowners seeking permission for extra, but independent, space for elderly relatives or grown-up children.

Recent figures showed nearly 10,000 new granny annexes had been built over the two years up until the end of last year.

It can make perfect sense financially for families to share the cost of household bills andreduce childcare costs if grandparents are able to look after children, or for adult children to keep an eye on frail relatives. There were, however, fears that the new Stamp Duty Land Tax (SDLT) rules, which came into force at the beginning of the month, could lead to the end of the granny annexe.

Under the new regime, buyers must pay an extra three per centStamp Duty if they purchase residential properties which are in addition to their main home.

Homeowners with self-contained accommodation designed to provide a home for relatives could be classed as having a second property under the latest rules when they come to sell their property. The worry was that buyers, who will have to pay SDLT upon any purchase, may havedecided against opting for a home with an annexe.

Thankfully, the Conservatives have now announced a U-turn and said granny annexes won't be included as separate homes. Even with new legislation, it would have depended on how planning permission was granted.Many annexes come with a clause which says they cannot be occupied other than as ancillary accommodation to the main residence, so they cant be sold off independently. Therefore, they shouldnt fall victim to any extra Stamp Duty.

Annexes would haveneeded to be classed as separate dwellings with separate entrances to be liable. To be a separate dwelling, the unit would need to have all of the facilities one would expect in a home, including its own kitchen and bathroom.

Not only that, but as separate entities, an annexe would need to be worth more than £40,000 to be subject to the higher rates of SDLT.

The Government has previously spoken about how multi-generational living is to be encouraged as a way to reduce social care costs and protect independence for the elderly. The worry is now that confusion over the new rules could mean families avoid constructing the extra space in the first place because of fears they wont be able to sell their home in the future.

A quick search of any property website already reveals a dearth of homes available with an annexe, with less than 100 currently on the market within a 40 mile radius of Darlington, for example. Fewer properties with suitable space for relatives could lead to a reduced choice for those who are no longer able to be totally independent.

The Treasury has, however, moved to offer reassurances that annexes will nownot be subject to the new rules, reiterating that its policy of helping first-time buyers onto the housing ladder remains a priority.

The problem could be, though, that elderly homeowners who may otherwise have moved into an annexe stay in their own property because of a lack of availability, meaning fewer properties on the market for those all-important first-time buyers.