Can you still claim SDLT multiple dwellings relief on a house with a granny annexe?

Introduction

Buyers often ask whether Stamp Duty Land Tax (SDLT) can be reduced when they buy a main house together with a self-contained annexe. This usually comes up where a family is buying a larger home so that an older relative can live nearby but separately. The key issue is whether the annexe counts as a separate dwelling for SDLT purposes and, if so, whether multiple dwellings relief (MDR) is available.

This question became especially important in 2024 because MDR was abolished for most transactions with an effective date on or after 1 June 2024. For some earlier contracts and transactions, transitional rules may still preserve the relief.

The Question

A buyer was purchasing a large house with an attached granny annexe. The annexe was said to be less than one-third of the size of the main house, to have its own external entrance, and to contain its own living accommodation including a kitchen, bathroom, bedroom and reception space. There was also a locked internal door between the main house and the annexe.

The buyer wanted to know whether SDLT could be reduced on the basis that the property included more than one dwelling, and whether the solicitor handling completion could be guided on the correct SDLT treatment before the filing deadline.

Nick’s Explanation

Nick’s key point was about timing. He explained, in substance, that “multiple dwelling relief is being abolished, so time is of the essence”. He then referred to the government’s operative date rules, namely that the abolition applies to transactions with an effective date on or after 1 June 2024, subject to transitional protection for certain contracts exchanged on or before 6 March 2024 and for certain transactions substantially performed before 1 June 2024.

That means there are really two separate questions:

• Does the annexe qualify as a separate dwelling for SDLT purposes?
• If it does, is MDR still available under the timing rules?

Nick’s response did not give a final technical conclusion on the facts, but it correctly identified that any MDR analysis had to be done urgently because the relief was being withdrawn.

The Law

SDLT is charged under the Finance Act 2003. Historically, where a purchaser acquired an interest in at least two dwellings in a single transaction, MDR could reduce the SDLT charge by applying the residential rates to the average price per dwelling, subject to a minimum rate floor.

The relevant statutory framework was contained in Schedule 6B to the Finance Act 2003. The central issue in annexe cases was usually whether the property being acquired included more than one “dwelling” for SDLT purposes.

For SDLT, whether a building or part of a building is a separate dwelling depends on its suitability for use as a single dwelling. This is a fact-sensitive question. HMRC and the courts look at matters such as:

• whether there is separate access;
• whether there are facilities for sleeping, washing, cooking and day-to-day living;
• the degree of physical separation from the main accommodation;
• whether the unit can function independently on ordinary residential use.

Buyers sometimes also refer to the “subsidiary dwelling” rules, under which a smaller annexe may be ignored for the higher rates where it is worth no more than one-third of the total value. That is a different rule. It concerns the higher rates for additional dwellings, not MDR itself. The one-third test does not by itself establish that MDR applies.

MDR was abolished by legislation taking effect for transactions with an effective date on or after 1 June 2024, subject to transitional provisions for some earlier contracts and substantial performance cases. So even if an annexe qualifies as a separate dwelling, the relief is now generally unavailable unless the transaction falls within those saving rules.

Where buyers argue that a building was uninhabitable or not suitable for use as a dwelling, the threshold is now relatively high following Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799. That case confirms that the bar for showing a property is not suitable for use as a dwelling is demanding. Ordinary disrepair, age, or the need for updating will often not be enough.

Analysis

On these facts, the annexe appears to have several features that point towards separate dwelling status:

• its own external door;
• its own kitchen and bathroom;
• its own bedroom and living space;
• physical separation from the main house, even though there is an internal connecting door.

Those are all indicators that the annexe may be capable of independent residential use. An internal connecting door does not automatically prevent separate dwelling treatment. Many cases turn on whether, viewed realistically, the annexe can be occupied as a self-contained residence.

However, the fact that the annexe is less than one-third of the size of the main house does not itself prove MDR. That point is commonly misunderstood. The one-third concept is more closely associated with the higher rates rules for subsidiary dwellings. For MDR, the real question is whether there are two dwellings in law.

If the annexe was genuinely self-contained at the effective date of the transaction, the next issue would have been timing. If the effective date was before 1 June 2024, or if the transaction fell within the transitional protection for contracts exchanged on or before 6 March 2024 without later variation, MDR might still have been available. If the effective date was on or after 1 June 2024 and no transitional rule applied, MDR would not be available even if the annexe was a separate dwelling.

It is also important not to confuse this with an “uninhabitable property” argument. In an annexe case, that issue may arise if one part of the property is incomplete or in poor condition. But after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799, the condition threshold for saying a property is not suitable for use as a dwelling is relatively high. The courts now expect significant evidence before accepting that a building falls outside dwelling status on condition grounds.

Outcome

The practical conclusion is this: a granny annexe can, in principle, count as a separate dwelling for SDLT purposes if it is genuinely self-contained and suitable for independent residential use. If that is established, the purchase may historically have qualified for MDR.

But MDR was abolished for most transactions with an effective date on or after 1 June 2024. So the availability of any SDLT reduction depends not only on the annexe’s features, but also on whether the transaction falls within the transitional rules preserving the relief.

Practical Steps

If you are assessing a similar purchase, the main steps are:

1. Check the transaction timing carefully, including exchange date, completion date and any substantial performance before 1 June 2024.
2. Review the annexe’s physical layout and facilities at the effective date of the transaction.
3. Gather evidence such as floor plans, sales particulars, photographs and survey material showing whether the annexe was self-contained.
4. Separate the MDR question from any higher-rates subsidiary dwelling issue. They are not the same test.
5. If any argument depends on the property or annexe being uninhabitable, make sure the evidence is strong, because the threshold is now relatively high after Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799.
6. Ensure the SDLT return reflects the correct legal basis and is supported by contemporaneous evidence.

Conclusion

A house with a granny annexe may amount to the purchase of two dwellings for SDLT purposes, but that depends on whether the annexe is truly self-contained and suitable for independent use. Even where that test is met, MDR is now generally unavailable unless the transaction is protected by the transitional rules that applied when the relief was abolished.

Legal References Used

• Finance Act 2003
• Finance Act 2003, Schedule 6B
• Stamp Duty Land Tax: abolition of Multiple Dwellings Relief from 1 June 2024 (HM Government publication)
• Amarjeet and Tajinder Mudan v The Commissioners for HMRC [2025] EWCA Civ 799

This page was last updated on 22 March 2026.

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