Multiple dwellings relief (MDR) will be removed from the 1st of June 2024 – here’s everything you need to know about what it is, why it matters and why it has been removed.

What is multiple dwellings relief? 

Multiple dwellings relief is a form of tax relief for owners of multiple properties.

This relief allowed buyers to pay stamp duty land tax on properties containing multiple residences – such as a house converted into flats – for each of the individual dwellings, rather than the total property price. 

What was the purpose behind implementing multiple dwellings relief?

Multiple dwellings relief was intended to help promote the purchase of these types of properties. 

In lots of cases, this reduced the tax payable significantly and made them more accessible to buy. This is because of the tiered system of council tax which means that a higher percentage is broken into for more expensive properties. This was intended to make the upfront costs of investing in these properties more accessible, by reducing the stamp duty land tax on them. The ultimate aim of this tax relief was to increase the supply of private rented properties available in the UK.

Why has multiple dwellings relief been stopped?

HMRC have evaluated the relief and concluded that it’s not fulfilling its purpose and is too open to abuse. 

In the Spring Budget of 2024, the Chancellor announced that after evaluation, MDR would be stopped because it is no longer fulfilling its intended purpose. 

For instance, High Net Worth individuals were able to purchase properties with ‘lodges’ or annexes on the land that reduced the stamp duty tax payable through MDR. It’s arguable that a lack of regulation on what constitutes a separate dwelling led to the abuse of this tax relief. 

What’s the impact?

The full normal residential stamp duty rates will now apply to the total purchase price of the property. 

This could significantly increase the tax payable as the total property price will be far more likely to break into the higher stamp duty percentage brackets.

How much stamp duty will now be payable on properties with multiple dwellings?

Here’s an example of how the change will affect purchasing this style of property parcels.

Imagine a house that has been converted into 2 flats. The total purchase price is £500,000. 

Before June 2024 the tax payable will be:

Currently, by using multiple dwelling relief, each flat will be treated as a separate dwelling worth on which stamp duty tax is paid. Therefore, with the current stamp duty tiering, you will pay:

  • 0% for the first £125,000 of each £250,000 property
  • 2% on the remaining £125,000 for each property, which is £2,500 for each 

This means the combined stamp duty for both properties will be £5000

After June 2024 the tax payable will be:

From this time the stamp duty will be paid on the full amount of £500,000, not on each dwelling. 

Let’s look into how this works out. For one £500,000 property, you will pay:

  • 0% on the first 125,000
  • 2% on £125,000 – £250,000, which is £2,500
  • 5% on £250,000 – £500,000, which is £12,5000

Therefore, the total payable stamp duty land tax on the property will be £15,000 

When will this be implemented?

Multiple Dwellings Relief will come to an end on 1st June 2024.

Are there any exceptions or exemptions?

There are no known exemptions to the removal of MDR. 

Need to talk over the implications of multiple dwellings relief ending with a trusted accountant? Contact the team at Williamson & Croft for a consultation.