Dropping of 'granny flat' stamp duty rise welcomed

Housing market experts have welcomed the Government's moves to exempt many "granny flats" from stamp duty rises intended for people buying second homes.

Stamp duty changes introduced on April 1 mean that people buying second homes, such as buy-to-let investors, are now subject to a three percentage point increase on previous rates. Fears had been raised that some granny flats would also be counted as a second home - and therefore liable to the surcharge.

But now the Treasury has confirmed that the Finance Bill will be amended so that fewer annexes to main houses will be liable. Anyone who has already paid too much will be able to apply for a refund.

The move means annexes that are capable of being sold separately, which are worth less than one third of the total transaction value, will no longer be subject to the extra charge.

Previously, it was estimated that less than 1,000 sales of homes with annexes a year would be affected by the new higher rate stamp duty, but with the changes to be made at the committee stage of the bill the number will be smaller than that.

But where a home with a granny flat does qualify for the surcharge, the higher rate will apply to both the main property and the granny flat.

An example of a granny flat that could be liable for the higher rate could be one that is capable of being sold separately and has its own front door, is worth more than one third of the property value, is worth more than £40,000 and has its own utility supplies and bills.

Jeremy Leaf, a north London-based estate agent and a former chairman of the Royal Institution of Chartered Surveyors (Rics), said: "In genuine cases, elderly parents and grandparents may have been forced into care homes and away from their families, which surely would have been contrary to the original intention. Common sense has prevailed."