November 2015 saw Chancellor George Osborne announce a significant rise in the amount of stamp duty for second home and buy-to-let properties. The new level, which came into effect in April this year, is higher than that on residential property by three percentage points. What this means is that buying a second home for £200,000, will now have £6,300 of stamp duty levied upon it, more than four times the £1,500 that would have previously been paid.
The Chancellor’s changes were originally planned to apply to small annexes on residential properties – commonly known as ‘granny flats’ due to them often providing somewhere for older relatives to live. However, pressure from both MPs and Saga, the company which provides goods and services to those aged 50 and over, has led to the government backtracking on this decision.
‘This is a victory for common sense,’ said Paul Green, Saga’s director of communications, about the reversal of the decision. ‘Saga voiced concerns on behalf of worried over 50s and we are glad the Government have listened. The Chancellor is right to act to ensure that families can be confident that they won’t be penalised for doing the right thing and looking after their parents at home.’
The amendments to the new legislation mean that granny flats will now be exempt as long as they do not make up more than a third of the value of the total property. Annexes will also incur the new stamp duty rate if they are capable of being sold separately from the main property, with their own water and electricity supplies as well as a separate entrance. They will also be subject to the higher rate if they are worth more than £40,000 and receive a separate council tax charge. If these criteria are met, however, it’s important to remember that the higher stamp duty will apply to both the annexe and the main property.