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:

1. Divide the total amount paid for the properties by the number of dwellings.

2. Work out the SDLT due on that figure.

3. 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 £1.6 million. The average price of each property is £400,000 (£1.6 million divided by four).

SDLT at the residential rates on a property costing £400,000 is £7,500, being 0% on the first £250,000 and 5% on the next £150,000.

The total SDLT due on all the properties is £30,000 (£7,500 x 4).

If SDLT had been paid on the total consideration of £1.6 million, the bill would have been £103,250 ((£250,000 @ 0%) + (£675,000 @ 5%) + (£575,000 @10%) + (£100,000 @ 12%)).

Example 2

Lucy buys three properties for £600,000, an average price of £200,000 per dwelling.

No SDLT is due on a residential property costing £200,000. However, where multiple dwellings relief applies, the minimum charge is 1% of the consideration, i.e. £6,000.

Consequently, Lucy must pay SDLT of £6,000.

If SDLT had been paid on the total consideration of £600,000, the bill would have been £17,500 ((£250,000 @ 0%) + (£350,000 @ 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 £103250 rather than £30,000, an additional £73,250 whereas Lucy in example 2 would pay £17,500 rather than £6,000, an additional £11,500.