Last chance saloon for Multiple Dwellings
18th March 2024
Posted in Articles, Stamp Duty Land Tax by Andrew Marr
It was announced in the recent Budget that Multiple Dwellings Relief (MDR) will be abolished from 1 June 2024. Any contracts that exchanged on or before 6 March 2024 will still be able to benefit from MDR on completion even if that takes place after 31 May 2024 (provided there are no variations). Transactions which exchange after 6 March 2024 will still benefit from the relief if completion takes place before 1 June 2024. Occasionally, changes apply from the date that they are announced but (perhaps surprisingly) in this case there is some breathing space.
Example
On 15 March 2024 Giles exchanged contracts to acquire a £3m house. The house has a ‘granny flat’ which can be used as a separate dwelling and having taken advice Giles intends to claim MDR on this purchase. This will be calculated as follows:
Step 1 – Divide the purchase price by the number of dwellings
£3m/2 = £1.5m
Step 2 – Calculate the SDLT on the step 1 figure at residential rates
£250,000 @ 0%
£675,000 @ 5%
£575,000 @ 10%
= £91,250
Step 3 – Multiply the step 2 figure by the number of dwellings
£91,250 x 2 = £182,500
Without an MDR claim £271,250 of SDLT would be payable. Therefore, the MDR claim will save Giles £88,750.
Put another way, if something happens to delay completion to beyond 31 May 2024 then that will cost Giles £88,750!
Forbes Dawson view
Although the abolition of MDR will affect some buy to let landlords, it is worth remembering that MDR still ‘kind of’ exists because there is a rule whereby the purchase of six or more dwellings is subject to much lower commercial rates (with a top rate of 5% for consideration over £250,000). Commercial rates often give a better result than making an MDR claim and so purchasers of large portfolios of property may not be too concerned about MDR’s demise. The real target for this abolition was probably people like Giles (above) who is set to enjoy an £88,750 saving for no real reason. Conveyancers may now need to prioritise their service for MDR cases in the run up to June so as to avoid angry customers and possible negligence cases, not to mention the possibility of property chains collapsing…
