Quarter of homeowners with annexes may have overpaid on stamp duty
A quarter (25%) of British homeowners with annexes could have overpaid on stamp duty according to new findings. Around 10,000 homeowners with annexes on their properties were reportedly not advised that they could have paid less stamp duty at the point of purchase.
Recently, properties with an annex have become a popular choice among buyers looking for somewhere with long-term flexibility. One lesser known benefit of owning a property with a self-contained annex is that you could be eligible for Multiple Dwellings Relief, meaning you could pay a reduced stamp duty fee.
Stamp duty cost homebuyers £13bn a year collectively prior to the holiday. It has been estimated that over £3bn worth of stamp duty was overpaid in 2015/16 due to mistakes in advice and confusing and complex rules.
Stamp duty is a poorly understood tax and with the nine-month holiday set to end in March 2021, this confusion amongst homebuyers around the ever-changing nature of SDLT is only likely to increase, according to David Hannah at Cornerstone Tax.
However the new findings by Cornerstone Tax found that 25% of homeowners in Britain who have an annex on their property were not advised that they could have paid a reduced rate of stamp duty on their property at the point of purchase. This often results in homeowners being owed tens of thousands of pounds in stamp duty refunds.
David Hannah, principle consultant and founder of Cornerstone Tax, said: “This research demonstrates a lack of clarity in and around stamp duty land tax, both by the public and by the legal sector.
“Millions of properties across the UK could qualify for reduced stamp duty rates, if for example, they have a self contained side annex as part of the property. In these cases, solicitors have a duty of care to inform their customers of all potential stamp duty reductions, including where Multiple Dwellings Relief is available.
“The mistakes being made are in almost all cases totally unintentional and otherwise made in fear of underpaying. Most legal professionals are ill-equipped to navigate the complex rules around it and need help.
“The law around SDLT is incredibly complex and many advisors who help homebuyers evaluate how much they should pay are trained only to differentiate between residential and commercial property.
“They simply aren’t familiar with the intricacies of the law’s evaluation criteria, which has led to many being mis-advised unintentionally. There are a number of other reasons why people have overpaid; it’s not always a misinterpretation of the 3% surcharge.”