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Annexe amendment added to Finance Bill

A proposed amendment to the Finance Bill will remove the ‘annexe’ tax when applied to purchasing a second property.

Individuals buying a self-contained annexe liable for SDLT will not be liable for the increased rate of stamp duty land tax (SDLT) introduced on 1 April 2016.

The exemption will only apply to a property with 2 or more dwellings in the grounds of a main home – worth 2/3 of the overall price.

If a house including a separate annex is bought for £600,000, the annex can't be worth more than £200,000. If so, the 3% SDLT charge will apply to the full price.

If the annexe is below £200,000 then SDLT will apply at the normal rate on the full price.

If purchasing a property as a second home or buy to let, the new SDLT surcharge will apply.

The government recently announced the change following the introduction of an extra 3% stamp duty land tax (SDLT) surcharge on additional property sales.

Thresholds Existing SDLT rates New SDLT rates
£0 - £125,000 0% 3%
£125,001 - £250,000 2% 5%
£250,001 - £925,000 5% 8%
£925,001 - £1,500,000 10% 13%
Over £1,500,000 12% 15%

In his speech in April to the House of Commons, David Gauke, said:

“I am happy to reassure the House that that is not our intention and the government will table an amendment in Committee to correct the error and ensure fair treatment for annexes.”

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