Author: Matthew Jeffery, Tax Director
The Spring Budget 2024 announced that Multiple Dwelling Relief (known as MDR) will be abolished in England & Northern Ireland from 1 June 2024.
In this article, Zeal explains what this means for the UK Real estate market.
What is Multiple Dwellings Relief (MDR)?
MDR is a Stamp Duty Land Tax (SDLT) relief that can apply to the purchase of two or more dwellings in a single transaction. By claiming MDR, SDLT is calculated based on the average value of the dwellings purchased rather than assessing each dwelling individually. This reduces the amount of SDLT payable.
Who can claim MDR?
MDR is applicable to individuals and companies acquiring multiple dwellings in one transaction. Most commonly, it is claimed by investors purchasing a block of residential flats or multiple properties in one transaction. However, MDR is also applicable to the purchase of your home or a holiday let, if it is acquired with a separate Annexe or similar self-contained living units.
MDR for Holiday Let Owners
Below are some examples of when MDR would be applicable to holiday let owners:
- Purchase of a residence with an Annexe.
- Purchase of a building with 2 or more self-contained flats.
- Purchase of residence with converted outbuildings.
- Site purchase with a business element (e.g. a shop) or there was land that included grazing or agricultural rights.
How much can you save?
As an example, if you buy a residential house with a ‘granny annexe’ for £1,000,000, SDLT payable would be £41,250. However, by claiming MDR, SDLT would be reduced to only £25,000, a saving of £16,250. This is because the purchase price is divided by the number of dwellings (2). This means you have 2 properties effectively being purchased for £500,000 each, which are subject to lower SDLT rates.
Who will be impacted?
The change to MDR will affect individuals, developers, or investors in the long run. It will increase the SDLT payable by individuals purchasing two or more dwellings in a single or linked transaction, and may affect the affordability of purchasing multiple dwellings in the long term.
As the relief ends from 1 June 2025, there is a small window of opportunity to buy multiple dwellings and reduce the SDLT payable via MDR. However, the transaction must complete by 1 June 2024. There are transitional rules in place whereby the MDR can still be claimed for contracts exchanged on or before 6 March 2024, regardless of when the completion takes place.
How does it impact properties situated in Wales or Scotland?
Currently, MDR will still apply in Wales (Land Transaction Tax) & Scotland (Land & Buildings Transaction Tax) post 1 June 2025. The Welsh Revenue Authority has announced a consultation into MDR relief public consultation on land transaction tax reliefs [GOV.WALES] so changes in the future appear likely in Wales. Scotland are also expected to follow suit.
What about the 6 or more property rule?
When you acquire 6 or more dwellings in a transaction, the non-residential (commercial) rates of SDLT can be applied. This will still be the case post 1 June 2024.
What about mixed use properties?
A mixed-use property combines both residential and non-residential elements to the properties. Mixed-use property ranges from a farmhouse with some land let for grazing, to fast food shops with flats above. When purchasing mixed-use property, it is possible to take advantage of commercial SDLT rates and also MDR without paying the additional property surcharge (currently 3% in England & Northern Ireland). From 1June 2025, this will no longer be possible for SDLT. The non-residential rates will, however, still apply.
What if you have missed a claim for MDR?
It is possible to make a claim for MDR up to 12 months after purchase. The claim is made by amending the SDLT return. Contact the team at Zeal if you think you may have overpaid SDLT!
Get in touch with Zeal!
01633 287898 | hello@gozeal.co.uk
Disclaimer by Zeal
This article was written by Matt Jeffery of Zeal Tax, a leading capital allowances specialist firm in the UK, as an educational piece to help business owners understand their tax responsibility. Matt can be contacted either by calling 01633 287898 or by email on hello@gozeal.co.uk.
The information provided in this article is of a general nature. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific advice from a professional before you take any action or refrain from action. Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We and our associates disclaim all warranties.
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