The abolition of Multiple Dwellings Relief for residential property

On 6th March 2024, Jeremy Hunt announced in his budget the abolition of multiple dwellings relief (MDR) from 1^st June 2024.  

In this article, our Senior Property Consultant Solicitor, Sonal Rabheru, takes us through what the abolition of multiple dwellings relief could mean for conveyancing and the wider property industry.

What is multiple dwellings relief?

This relief in stamp duty land tax (SDLT) applies to the purchase of 2 or more dwellings in a single transaction in England and Northern Ireland. 

Who is still eligible for multiple dwellings relief?

Purchasers that have exchanged contracts on or before 6^th March 2024 remain eligible to claim MDR regardless of when the transaction completes (as long as there is no variation of the contract), but where the contract is made after 5 March 2024, it is abolished for those matters that complete on or after 1^st June 2024.

Why is multiple dwellings relief being abolished?

The relief was previously introduced to promote the private rented sector. However, a recent evaluation concluded that there was “no strong evidence” that the relief plays a significant role in supporting residential property investment.

Will this have a significant impact on the housing sector and residential conveyancing? 

Businesses or landlords purchasing multiple dwellings in a single transaction will be impacted, but those purchasing 6 or more dwellings may be eligible for non-residential rates of SDLT.

It will also have an impact on those individuals purchasing a property with a granny annexe or similar subsidiary dwelling as the relief provided significant savings.

It will not, however, impact those purchasing a single dwelling. The relief has been known to be misused by some individuals claiming MDR for purported granny annexes or the like.  This was perhaps an unintended consequence of the act, and the abolition will now stop incorrect or fraudulent claims. MDR was, like all reliefs, misused by some, and has caused tax tribunals to debate whether many detached outbuildings are actually dwellings.

In my opinion, the relief was a nice surprise to most residential clients, and did not impact the decision to purchase.

It is therefore likely to impact developers or investors, but there is a small window of opportunity to complete any existing matters by 1^st June 2024. 

So we say goodbye to MDR, which may bring a welcome relief to some property solicitors due to the confusion it has caused. But, until then, we may see a rush to bring any impacted transactions to a swift conclusion before the deadline of 1^st June 2024.