Multiple Dwellings Relief (MDR) used to be a relief available from Stamp Duty Land Tax on purchases of 2 or more dwellings in a single transaction or linked transactions.
The stamp duty payable is calculated on the average value of the properties rather than the total purchase price. The Government introduced this to encourage people to invest and develop residential property.
What are the upcoming changes to multiple dwellings relief?
From 1 June 2024 the multiple dwellings relief will no longer be available in England and Northern Ireland. This means that individuals who wishes to purchase two or more dwellings will need to pay the full amount in stamp duty land tax (SDLT).
The main reason for this change is that over the years there have been a lot of disputes when claiming for multiple dwellings relief. The disputes have commonly arisen in identifying what qualifies as a separate dwelling which has subsequently created an influx of questionable cases.
On 6 March 2024, HM Revenue and Customs published a summary for multiple dwellings relief, to see if the scheme was fit for purpose, and if it was in line with the Government’s aim.
However, the results concluded that around 51% were using the scheme for personal purposes, such as living in the properties, giving the properties to family, or using the properties as a second home. A third (35%) of claimants used dwellings for business purposes only including renting out, property development, storage and as office space.
Overall, the objective of multiple dwellings relief was to strengthen demand and reduce barriers to investment in residential property, with the intention of promoting increased supply in the private rented sector. However, the report uncovered little to no evidence of the relief having this effect.
What are the options for multiple dwellings going forward?
Six or more properties: Nevertheless, where an individual is purchasing six or more properties in the same transaction, non-residential stamp duty land tax rates can be applied. This means a maximum rate of 5% compared to a top residential rate of 17% if surcharges apply.
Mixed-use purchase: If individuals wish to invest in and develop residential property but are concerned about the higher rates in SDLT, there is always a possibility that they could purchase a property that included use for both commercial and residential. For example, a shop with flats above it. This way a mixed-use transaction would be subject to lower SDLT.
What about multiple dwellings relief in Wales?
Multiple dwellings relief is still available in Wales. To claim for multiple dwellings relief the property must have its own kitchen area, bathroom, and space to live and sleep and to have independent access to the property.
When you are claiming multiple dwellings relief you must pay at least 1% of the purchase price of the property in Land Transaction Tax (LTT). However, there are some exemptions in certain cases when multiple dwellings relief will not be available and those are:
- Group Relief
- Reconstruction and acquisition relief
- Charity relief
- Persons exercising collective rights
- Some transactions involving leasehold interest
- Transactions where the subsidiary dwelling exception means the main rates of land transaction tax apply.
What does this mean for you?
It will be interesting to see if the market slows down in investing and developing residential property due to the higher rates in Stamp Duty Land Tax. However, there are options out there, which can reduce the amount you pay on SDLT such as the six or more property rule and mixed-use property.
This information is for guidance purposes only and does not constitute legal advice. We recommend you seek legal advice before acting on any information given.
