Multiple Dwellings Relief Abolished: What Now?
22 March 2025
What was Multiple Dwellings Relief?
Introduced in 2011, MDR was introduced as a means to encourage residential property investment by reducing the Stamp Duty Land Tax burden on purchases involving multiple dwellings. Instead of calculating SDLT on the total purchase price, Multiple Dwellings Relief allowed buyers to determine the tax based on the average price per dwelling, which often resulted in substantial savings.
Why was MDR abolished?
The plans to abolish Multiple Dwellings Relief were announced in the Spring Budget of 2024. There were three primary motivations behind the abolition, namely:
Concerns regarding misuse
Whilst MDR was intended to reduce SDLT for multiple residential property transactions, HMRC reported that many buyers were seeking to exploit loopholes, such as claiming spaces such as garages or outbuildings were separate dwellings, even if they didn’t function independently.
Tax revenue loss
The Treasury estimated that MDR was leading to a £700 million a year loss in tax revenue.
Failure to meet the original objectives
MDR was introduced to support investment into the private rented sector, but was instead predominantly utilized by individual buyers purchasing homes with annexes rather than by large-scale developers. In February 2023, HMRC commissioned an external evaluation of MDR, which found that there was no strong evidence to suggest that the relief was improving private rented sector development.
Who was most affected by the changes?
Smaller scale investors, purchasing fewer than six units in a single transaction were impacted by the abolition of MDR as they will now face paying SDLT at up to 15% of the property value. Private rented sector investors who are purchasing a portfolio with some aspect of commercial property will also be impacted, as previously MDR entitled them to reduced rates of taxation. Purpose-built student accommodation will also be impacted.
Impact of the MDR abolition on granny annexes
Whilst MDR was never intended for use for property transactions involving ancillary dwellings, the abolition of the relief will likely increase the SDLT that buyers will face. Following the abolition of MDR, buyers must now calculate SDLT on the total purchase price of the property, rather than benefiting from the average. A property valued at £550,000 with a separate granny annexe would have encountered an SDLT of £5,500 under MDR, but post- abolition this liability rises to £15,000; a 273% increase.
There are other potential financial implications of ancillary buildings, such as additional surcharges, as well as potentially impacting the inheritance tax calculations.
Alternative SDLT Strategies
1. Mixed-Use Property Transactions
Purchasing a mix of residential and non-residential properties in a single transaction may still qualify for the non-residential SDLT rate, which is generally lower than the standard residential rates. This can be an option for those investing in properties with commercial elements, such as a building with retail space on the ground floor and residential units above.
2. Purchasing Through a Limited Company
Many investors already use limited companies to acquire rental properties due to potential tax efficiencies. Although MDR is gone, company purchases may still benefit from different SDLT considerations and corporation tax rates, which might make this structure more appealing than personal ownership in certain scenarios.
3. Portfolio Incorporation and Transfers
For portfolio landlords with multiple properties, incorporation relief may still be an option when transferring properties from personal ownership into a limited company. While SDLT is generally payable, under specific conditions investors may mitigate tax liabilities through professional tax planning. Speak to a qualified tax consultant or financial specialist to check your eligibility.
4. Exploring Regional SDLT Variations
While England no longer has MDR, property transactions in Scotland and Wales are subject to Land and Buildings Transaction Tax (LBTT) and Land Transaction Tax (LTT) respectively. Understanding regional differences and planning accordingly may still offer financial advantages to your specific requirements.
5. Negotiating Purchase Prices
With SDLT now increasing costs for bulk purchases, buyers may have more leverage in negotiations. Sellers aware of the increased tax burden might be open to adjusting prices to accommodate buyers facing higher upfront costs. So, there are some potential positives for buyers that have arisen from the halting of MDR.
What should you do if you are affected by the MDR abolition?
Given the complexities of SDLT, you may benefit from speaking to a specialist such as About Mortgages. Our team can offer specialist mortgage advice, helping to take the stress and time out of choosing from the myriad of options available to you. Our expert mortgage advice is personal to you, and our team of mortgage advisors are always happy to help talk through your options at your pace.
Whether you are a homeowner, investor or property developer, our team is here to help. Book an appointment with one of our advisors here.