House buyers face stamp duty hike this weekend as ‘granny annexe tax’ kicks in

Introduced in 2011, MDR has since prompted some companies to file dubious claims for relief on behalf of homeowners – only to disappear before the taxman realises their mistake.

Paula Higgins, of Homeowners Alliance, said these “ambulance chaser tax firms” tend to act quickly, leaving homeowners out of pocket.

“These firms say they can get you a tax rebate, ‘no win, no fee’. But if you do go through with it, pay their fee and get an initial ‘win’ from HMRC – the taxman may later change its mind, say one or two years later, once they’ve reviewed it again.

“Then you’re left with a big stamp duty bill, having paid a fee for nothing. We always say, with tax there’s no such thing as a free lunch.”

MDR was also used by developers to purchase semi-commercial blocks, where homes are in the same building as a shop.

Kundan Bhaduri, of property developer The Kushman Group, said these types of transactions will now slow down – increasing the cost of converted apartments, since the developer will have to pay more for them.

He added: “Acquisition costs of granny-annexed homes will also increase as a result of these changes.”

But for first-time buyers, the tax change could help increase the number of homes for sale on the market. This, Mr Bhaduri said, is because the most common use of the MDR relief is when portfolio landlords buy blocks of flats.

“In the Midlands and across the North East, it is not uncommon for portfolio landlords and investors to buy a block of say, eight £60,000 flats.

“That’s still under half a million, which would barely buy you an apartment in outer London. So effectively, MDR helped investors looking to buy blocks.”