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Stamp Duty 2022 – What’s going to happen?

Last year proved to be an astonishing one for the UK property market – with house price growth showing an extraordinary 11.8% annual rise in 2021. This rise can be attributed, in no small way, to the stamp duty holiday. The stamp duty holiday was a tax break introduced in the U.K. during the peak of the coronavirus pandemic in July 2020, which scrapped the transfer tax on the first £500,000 of a home sale with savings of up to £15,000 available to buyers.

The holiday was gradually phased out and reverted to the typical stamp duty system at the end of September 2021. With the end of the stamp duty holiday, the question must be: what is the future of stamp duty for 2022?

David Hannah, principal consultant at Cornerstone Tax discusses the future of stamp duty in 2022:

“This is the hot topic at the moment – will stamp duty change in 2022? In late 2021 HMRC published a consultation document on proposed changes to the mixed-use property rules and multiple dwellings relief. Meaning if you buy a property, currently, which has any element of non-residential or is not suitable for use as a dwelling then you don’t pay the higher residential rates of SDLT and HMRC are ‘consulting’ about how they can change that to remove the advantage that these properties have.

“One of the things they’re proposing is that we’re going to be required to split out the non-residential elements of the property and only pay the non-residential rates on that part. In their consultation document they give an example of a house at three and a half million where the tax nearly doubles from £161,000 to £320,000. But the good news is that, even if they do implement those changes, if you’re buying a property at a million or less these proposed changes, if implemented, won’t affect you at all so there’s no need to worry about it.

“Where it’s really going to bite down is on large country estates and expensive London properties where certain features – which currently make them mixed-use will no longer be available. As a result, the tax savings aren’t going to be around.

“More importantly, they’re proposing to change the basis of calculating multiple dwellings relief and for most of us that’s afforded as a £10,000 saving minimum if we’ve bought a house with an annex. They’re now proposing that the ‘granny annex advantage’ should be eliminated. They are suggesting that any house with an annex (where the annex is worth less than a third of the main house) won’t be eligible for multiple dwellings relief. This could cost the average annexed house owner from £10,000 to £87,000. The consultation document talks about supporting keeping families together but it’s clear that the revenue don’t like the tax advantage that these properties have. I would say it’s not an advantage for certain taxpayers, it’s an advantage for certain properties.

“For most of us this will probably mean that over the course of 2022, possibly even early 2023, we’re going to see the law changed, but it can only be changed going forward. This means many of the advantages which they talk about in this document are going to be available on past historic purchases if you can conduct a review of your transaction and will be available until the law changes.”