What Does the End of Multiple Dwellings Relief Mean for Homeowners and Buyers?

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Multiple Dwellings Relief (MDR) is being abolished from 1 June 2024. For anyone who has bought multiple properties in a single transaction or is in the process of doing so, this means they could lose out on a significant reduction in their Stamp Duty Land Tax (SDLT) bill.

If this applies to you, it is important to understand what is changing and what you need to do about it as there may still be time to take advantage of MDR before the deadline.

In this article, we cover what Multiple Dwellings Relief is and how it works, why it is being abolished, what homebuyers and investors need to do and other possible options for reducing your Stamp Duty liability.

Need help with a residential property purchase as a homebuyer or investor? Please contact Karen Fletcher who will be happy to advise.

Key points to know about the end of Multiple Dwellings Relief

  • Multiple Dwellings Relief could allow people buying two or more properties in a single transaction to reduce their Stamp Duty Land Tax bill
  • MDR is being abolished because it did not achieve its intended purpose of improving housing supply, including in the private rental sector
  • Eligible homeowners who did not take advantage of MDR when making a purchase can retrospectively apply for the relief and apply to HMRC for a refund before 1 June 2024
  • MDR can still be applied to property transactions that complete before 1 June 2024 or any transaction where contracts were exchanged before 6 March 2024
  • Other options to reduce Stamp Duty liability are still available in certain circumstances, so it is wise to get expert advice before making a purchase

What is Multiple Dwellings Relief?

Multiple Dwellings Relief (MDR) is a form of tax relief that can potentially allow someone buying two or more properties in a single transaction to reduce their Stamp Duty Land Tax (SDLT) bill.

Essentially, MDR allows you to average out the prices of the properties you are buying, then pay the amount of Stamp Duty for that average price multiplied by the number of dwellings in the transaction.

An example of where this could result in a significant saving would be if you were purchasing a town house with a basement flat where the town house was worth £1.5 million and the basement flat £250,000.

Without MDR, the Stamp Duty on the transactions would be £121,250.

Using MDR, you would take the two properties’ combined value of £1.75 million and divide this by two, giving an average value of £875,000. The Stamp Duty on an individual property of this value would be £31,250, so for the two properties, under MDR, you would double this, giving a total Stamp Duty bill of £62,500.

In this example, Multiple Dwellings Relief would, therefore, save the purchaser £58,750 in Stamp Duty.

Why is Multiple Dwellings Relief being abolished?

The government originally introduced Multiple Dwellings Relief in 2011 as a means to encourage residential property investment and boost housing supply in the private rental sector.

Following an external review commissioned by HMRC, it was determined that MDR had had a minimal impact on housing supply and was not cost effective, having cost over £700 million in 2022-2023 alone.

As a result, it was announced in the Chancellor of the Exchequer’s Spring Budget on 6 March 2024 that MDR would be abolished from 1 June 2024.

What do homeowners and buyers need to do?

If you have already purchased two or more properties in a single transaction and did not make use of Multiple Dwellings Relief, then it may be possible to submit a retrospective MDR SDLT refund claim to HMRC and have any overpayment repaid. However, this claim would need to be submitted before 1 June 2024.

If you are in the process of purchasing two or more properties that would be eligible for Multiple Dwellings Relief, then you need to complete the transaction before 1 June 2024 in order to be eligible for MDR. The exception to this is if you exchanged contracts before 6 March 2024, in which case MDR can still be applied even if completion occurs after 1 June.

Are there any other ways for property investors to reduce SDLT?

Where you are purchasing or have purchased six or more residential properties in a single transaction, there is another option you can use. On such transactions, you can pay the non-residential rate of SDLT, assuming the total value of the properties is £150,000 or more. This could potentially see you pay significantly less in Stamp Duty than if you were purchasing the same properties and paying the residential rate of SDLT.

There may also be other forms of SDLT relief available depending on your circumstances, so it is a good idea to discuss this with your conveyancing solicitor at an early stage in your purchase.

How Longmores can help homebuyers and property investors

When buying a property, either as your own home or for investment purposes, the right legal support can be critical. A good residential property lawyer can help you to get the best deal and uncover any potential problems, as well as ensuring the transaction goes ahead smoothly and on schedule.

At Longmores, our Residential Property team have been supporting people with buying homes and investment properties for many years. We have the expertise and proactive approach to guide you through every step of your transaction, including helping to minimise your Stamp Duty liability.

To discuss how we can help with residential property purchases for homebuyers and investors, please contact Karen Fletcher who will be happy to advise.

Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.