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Multiple dwelling relief to reduce SDLT

Our clients often ask about the reliefs available to offset tax when buying and selling property.

If you’re a homebuyer purchasing multiple dwellings then you may be able to claim Multiple Dwellings Relief (MDR). MDR can be used to offset the amount of stamp duty paid when purchasing multiple properties in the same transaction. In this blog we give you all the information you need about MDR for Stamp Duty.

Multiple dwelling relief to reduce SDLT

What is Multiple Dwellings Relief for SDLT?

Multiple Dwellings Relief (MDR) for Stamp Duty Land Tax (SDLT) is a relief that can be claimed when you purchase more than one dwelling in a transaction. MDR could apply for example if you buy multiple properties from a developer or where you transfer properties from personal ownership to a limited company.

MDR applies Stamp Duty Land Tax (SDLT) to the average value of the collective properties, instead of the purchase price of the individual properties or the total purchase price.

What is classed as a dwelling?

The word ‘dwelling’ refers to a building where one household live (e.g. a house or flat). It also includes land that comes with the dwelling, like a garden or land that benefits the dwelling, like a separate garage in a block.

The types of properties that can be claimed under multiple dwellings relief include:

  • Houses, apartments or flats bought together.
  • A self-contained annex purchased with a house.
  • Mixed-use property (e.g. a shop with a flat above).

When can you claim Multiple Dwellings Relief?

To be eligible to claim Multiple Dwellings Relief, your transaction must be of at least two dwellings, or be of a single dwelling IF it is part of a ‘linked transaction’ (see description below).

To qualify for multiple dwellings relief, you must be buying two or more properties (dwellings) in the same transaction or linked transactions. If you purchase between 2 and 5 properties, residential MDR will apply. If you’re purchasing more than or mixed-use properties (residential and commercial) you can apply non-residential SDLT rates. Non-residential SDLT rates are lower than residential rates.

What is a linked transaction?

A ‘linked transaction’ is where multiple property transactions are undertaken between the same buyer and seller. Or it could be where you transfer your personally held portfolio into your limited company. Because the rate of Stamp Duty Land Tax is applied to the value of the collective properties in the linked transaction; the tax rate is potentially higher than an individual property. But MDR applies and the rate of tax is charged by the average price of the dwellings.

Multiple Dwelling (MDR) rates

Below are the current MDR rates:

  • A minimum of 1% tax must be paid on the purchase price.
  • 3% additional SDLT rate for residential property purchases.
  • Mixed-use properties are exempt from the 3% surcharge and pay commercial stamp duty rates, not residential.

When does Multiple Dwellings Relief not apply?

MDR doesn’t apply to the transfer of a freehold reversion or head lease if one of the dwellings has a 21 year or higher lease.

After the initial transaction, if the number of dwellings is reduced within 3 years, you may need to fill in an additional return and recalculate the tax due.

Claiming Multiple Dwellings Relief

Multiple dwellings relief should be claimed through your professional advisors, at the time of purchase. If you’ve overpaid stamp duty, it’s possible to submit a retrospective MDR claim up to 12 months from the filing date.

You may need evidence of the multiple dwellings, such as a surveyor’s report or property floor plan.

Do I have to pay the 3% SDLT Surcharge?

If you own a home, there is a 3% SDLT surcharge that is chargeable upon purchase of additional residential property. This doesn’t include homes that are bought to replace your current home.

Multiple Dwellings Relief can potentially save you thousands in stamp duty. Stamp Duty Land can be a very complicated area. When looking at reliefs such as this, we always suggest you speak to a professional tax advisor. For more advice on MDR contact our specialist dns tax team today by calling 03300 886 686, or e-mail us at info@dnsaccountants.co.uk.

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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

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