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Multiple Dwellings Relief on Granny Annexes and Separate Dwellings

Published by UK Property Accountants
Posted Date: February 22, 2023 , Modified Date: April 25, 2024

Constantly worrying about the well-being of your elderly loved ones? You ought to look no further than a Granny Annexe. Granny Annexe is basically a secondary building usually situated in garden area of the primary home. If you're looking to buy these kind of properties, you probably are familiar with Stamp Duty Land Tax.  

As experienced tax advisors, we understand UK's Stamp Duty land tax (SDLT) system and the impact it can have on individuals and families looking to purchase a property with one .

Through this article we want to share some valuable insights about the  Multiple Dwellings Relief available for Stamp Duty Land Tax and how it can help you save on your tax bill.

What is Granny Annexe?

Granny Annexe is simply a self contained, cost-efficient and convenient living space designed to provide the perfect living solution for variety of needs. These types of properties are becoming increasingly popular way for families to accommodate elderly relatives or may be create additional income through rentals.

Generally, an annexe has the following features:

  • It can be used as a separate living accommodation.
  • It has facilities such as cooking, toilet, and washing.
  • It has an entrance of its own.

Due to additional facilities added to the main house the property might have higher market value than a property with only main house.

The good news is there is “Multiple Dwellings Relief ” available on stamp duty and land tax which can offer significant savings for those who qualify.

What Qualifies as a Separate Dwelling for Multiple Dwellings Relief?

eligibility for qualifying as a separate dwelling

To qualify for the relief, two or more dwellings must be purchased in one transaction, and each dwelling must be able to exist independently.

Which means the granny annexe must have its separate facilities, such facilities includes living and sleeping area, access and control to basic utilities, separate kitchen and bathroom area, have privacy and must be self-contained.

Following are few basic criteria for a dwelling to qualify for a separate dwelling:

1. Suitability for use as a dwelling

Each dwelling should provide occupants with basic domestic living needs such as a sleeping area, living area, kitchen, bathroom, etc. The idea is that the dwelling is capable to exist independently.

2. Independent entrance

Each dwelling must have a separate entrance, this can be a separate entrance from the common part of the building or outside the building.

3. Privacy

There must be a degree of privacy for each dwelling from another. If there is any door interconnecting between two dwellings it must be locked from both sides to ensure privacy.

4. Control Utilities

A single dwelling must have access to basic utilities such as water, heating, electricity, etc. Not only that each dwelling must be able to control utilities provided to them.

5. Separate bills and posts

Though separate letter boxes, bills etc, can act as strong evidence for separate dwellings it is not conclusive. Lack of it will not be a deciding factor on whether a separate dwelling exists.

How does Multiple Dwellings Relief work?

Multiple Dwellings Relief works by dividing the total price of the residential property by number of dwelling bought and calculating appliable SDLT on the average property price.

The resulting average SDLT amount then is multiplied by the purchased number of dwellings.

For Example, 

Mr. Brown purchased his second property with main house and a granny annex at £1 million.

Normally, if he does not claim for Multiple Dwellings Relief  he would have to pay the SDLT based on the total price of the property, which would amount to £71,250.

If his granny annexe can qualify as a separate dwelling then he can claim for Multiple Dwellings Relief where he would have 2 dwellings, in this condition the stamp duty and land tax chargeable would be £55,000.

Here, Mr. Brown saved £16,250 on his stamp duty and land tax bill.

As you can see, Stamp Duty and Land Tax bill can be saved significantly through Multiple Dwellings Relief for buyers purchasing a property with granny annexe.

The real challenge comes when identifying whether a property qualifies for Multiple Dwellings Relief. Thus, it is important to seek professional advice to ensure that the relief is correctly applied and determine whether the relief is available for specific purposes.

Multiple Dwellings Relief (MDR) Calculator

Introducing the first of its kind, our in-house MDR calculator. Be the first to know a potential savings you could make on the your SDLT!

Get refund for excess payment of stamp duty and land tax!

If you have recently discovered that the property you purchased is eligible for Multiple Dwellings Relief, and you have already paid more than the required stamp duty and land tax, don't worry! We're here to help you get a refund for that excess amount you paid.

It is important to note that there is time limit for applying for a refund for stamp duty and land tax, the basic rule is that a refund must be claimed within 12 months after filing of original SDLT return.

Our team of experts specializes in assisting individuals who have overpaid certain taxes. We understand the complex regulations surrounding Multiple Dwellings Relief and will work diligently to ensure that you receive the maximum refund possible.

So, we suggest not to delay your refund process if you think you qualify for a refund.

How can UKPA Help?

As experienced tax advisors, it is our duty to inform our clients of all their tax saving options. The Stamp Duty Multiple Dwellings Relief is just one of many tax-saving opportunities available to individuals and families, and we are well-equipped to guide you through the process and ensure that you are taking advantage of all the tax benefits available to you.

Our team of experienced tax advisors has a deep understanding of the SDLT system and can provide tailored advice to suit your specific needs. Whether you are a first-time buyer or an experienced property investor, we are here to help you navigate the tax implications of your purchase and ensure that you pay the minimum amount of SDLT possible.

If you are considering the purchase of a Granny Annex, don't hesitate to reach out to us. Our team of tax advisors is here to provide you with the expert guidance and support you need to make an informed decision.

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