As announced at the time of the Spring Budget, multiple dwellings relief for stamp duty land tax (SDLT) is to be abolished from 1 June 2024. The relief is available where a purchaser buys two or more dwellings in a single transaction or series of linked transactions.
Nature of the relief
The relief was introduced in 2011 to remove barriers to investment in property and to promote the supply of homes for the private rental sector.
A buyer is able to claim the relief where they buy two or more dwellings in a single transaction or a series of linked transactions. Where the relief applies, the SDLT is calculated by reference to the average value of the dwellings rather than on their aggregate value.
The rate of tax is worked out as follows:
- Divide the total amount paid for the properties by the number of dwellings.
- Work out the SDLT due on that figure.
- Multiply this by the number of dwellings.
This is subject to a minimum rate of 1% of the amount paid for the dwellings.
Example 1
Tom buys four houses for ยฃ1.6 million. The average price of each property is ยฃ400,000 (ยฃ1.6 million divided by four).
SDLT at the residential rates on a property costing ยฃ400,000 is ยฃ7,500, being 0% on the first ยฃ250,000 and 5% on the next ยฃ150,000.
The total SDLT due on all the properties is ยฃ30,000 (ยฃ7,500 x 4).
If SDLT had been paid on the total consideration of ยฃ1.6 million, the bill would have been ยฃ103,250 ((ยฃ250,000 @ 0%) + (ยฃ675,000 @ 5%) + (ยฃ575,000 @10%) + (ยฃ100,000 @ 12%)).
Example 2
Lucy buys three properties for ยฃ600,000, an average price of ยฃ200,000 per dwelling.
No SDLT is due on a residential property costing ยฃ200,000. However, where multiple dwellings relief applies, the minimum charge is 1% of the consideration, i.e. ยฃ6,000. Consequently, Lucy must pay SDLT of ยฃ6,000.
If SDLT had been paid on the total consideration of ยฃ600,000, the bill would have been ยฃ17,500 ((ยฃ250,000 @ 0%) + (ยฃ350,000 @ 5%).
Abolition
In November 2021, the Government published a consultation on multiple dwellings relief which considered options for tackling abuse of the relief. The consultation also looked at SDLT on mixed property purchases. The consultation ran until February 2022. The Government response was published at the time of the Spring Budget on 6 March 2024.
The consultation indicated that the availability of the relief has minimal impact on the supply of private rented housing and was not cost effective. Consequently, it is being abolished.
Multiple dwellings relief will no longer be available in respect of transactions with an effective date of 1 June 2024 or later. This is the completion date.
However, if contracts were exchanged on or before 6 March 2024, the relief will continue to be available, even if completion takes place on or after 1 June 2024. It will also apply where the contract is substantially performed before 1 June 2024.
If linked transactions include the purchase of dwellings that complete both before 1 June 2024 and on or after 1 June 2024, for the purposes of the relief, the pre and post 1 June 2024 completions will be unlinked, with multiple dwellings relief being available for those completing before 1 June 2024 but not for those completing on or after that date.
Impact
The abolition of the relief will increase the SDLT payable on the purchase of multiple dwellings considerably. In example 1 above, Tom would pay ยฃ103250 rather than ยฃ30,000, an additional ยฃ73,250 whereas Lucy in example 2 would pay ยฃ17,500 rather than ยฃ6,000, an additional ยฃ11,500.
Partner note: FA 2003, s. 55D.
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