Spring Budget Update – the Abolition of Multiple Dwellings Relief against SDLT

What is Multiple Dwellings Relief?

MDR was first introduced in 2011 with the objective of encouraging the reduction of barriers to investments into residential property.
It is a partial relief that is available against stamp duty land tax (“SDLT”). It operates to reduce the SDLT liability payable by a buyer when purchasing two or more residential properties in a single transaction (or in linked transactions).

As an example, if a buyer purchased two dwellings in the same transaction without utilising MDR the investor would have to pay SDLT on the full purchase price. However, applying MDR would allow the overall purchase price to be divided by the number of dwellings allowing the buyer to pay SDLT with the benefit of two or more lower rate bands of SDLT. This can lead to large savings on SDLT.

What is changing?

As a result of no strong evidence that MDR has supported residential investment, MDR is going to be abolished as from 1 June 2024.
However, if contracts are exchanged to purchase two or more dwellings on or before 6 March 2024 the purchaser will continue to benefit from the relief even if the purchase completes on or after 1 June 2024.

What effect will this have?

Whether or not there will be a large increase in transactions of multiple dwellings completing before 1 June 2024 remains to be seen. Nevertheless it is investors and developers (rather than individual purchasers) who are likely to feel the biggest impact in this change in the law.
However, investors purchasing six or more dwellings will still be able to apply non-residential SDLT rates to the purchase, meaning the top rate of SDLT will be limited to 5%.