Janice R. Andrews
Jeremy Hunt made a daring announcement today on the implementation of a “granny annexe tax” as part of a stamp duty crackdown. This measure might have a substantial financial impact on property buyers.
Hunt is to do away with the Multiple Dwellings Relief (MDR) program, which formerly exempted buyers of two to five properties from paying full stamp duty, as of June 1. Properties with annexes, which were formerly counted as two houses, are especially impacted by this change.
The new rules eliminate tax breaks for those buying properties with annexes to care for aging relatives, which might result in treble stamp duty land tax obligations.
Partner at Blick Rothenberg Roger Holman cautioned that this would have a major impact on families planning to move in together and take care of aging relatives. According to his estimation, the modifications may result in an extra £68,750 in stamp duty for a £2 million property with an annexe.
Holman called the policy effectively a “granny annexe tax” and said that purchasers would try to bargain for a cheaper price as a result of the higher tax burden.
The Chancellor has blasted the MDR plan, which was first unveiled in 2011 with the goal of encouraging investment in the private renting sector, for allegedly being abused and failing to generate the desired amount of capital.
Over the following five years, it is projected that eliminating MDR will increase tax receipts by £1.3 billion; however, detractors contend that this ignores the fundamental problem of a shortage of housing.
Transactions with an effective date of June 1st or after will be subject to the new rules. The government states that contracts that were exchanged on or before March 6 will still be eligible for the rebate even if they are completed after June 1.
