From 1st June 2024, there will be a significant change made to Stamp Duty Land Tax in the property world as we see the abolishment of Multiple Dwellings Relief.
Currently, in England and North Wales, when a purchase involves multiple dwellings (i.e. more than one property), in either a single or linked transaction, the owner can benefit from a tax relief known as Multiple Dwellings Relief.
For thirteen years, investors and landlords have received a reduced tax rate when purchasing multiple-dwelling properties. These upcoming changes will increase the cost of buying for multi-unit purchases as the aggregate tax reverts to the full amount payable.
Why auctions are the key to a timely sale
With the deadline fast approaching, there is a window of opportunity to sell these assets with the enticement of a relief in additional tax. Selling by auction could be the most efficient selling route to provide a successful sale before 1st June 2024.
Offering insight, Oliver Prior, National Commercial Director at Auction House commented:
"Landlords facing the abolishment of Multiple Dwellings Relief should seriously consider the auction route. Auction offers a streamlined process to sell properties quickly and with certainty, providing a viable solution for those looking to divest their portfolios efficiently and before the 1st June. At Auction House, we host weekly online auctions, along with regular livestream auctions across the country, which provide a reliable and fast method of selling.”
This shift also presents an opportunity for new investors to increase their portfolio, with the possibility of more properties becoming available to purchase.
How does multiple dwelling relief work?
In cases involving multiple dwellings, purchasers could determine the tax based on the average value of the properties rather than their aggregate value.
For example, let’s imagine you have just acquired a property that comprises three rental units. If the property has been given a market value of £500,000, then an average value for each of the units would be calculated as £166,666.67*.
With the above calculation, the owner would be expected to pay £27,000* in SDLT.
When multiple dwelling relief was active, this would reduce the SDLT amount payable to £15,000*, saving the owner £12,500*.
Why was multiple dwelling relief introduced?
Introduced in 2011, MDR was implemented to alleviate potential obstacles for individuals interested in investing in residential properties. The primary goal was to stimulate growth in the housing supply within the private rented sector.
Has multiple dwelling relief been abolished?
In 2023, external parties conducted both a quantitative evaluation report and a qualitative evaluation report. Subsequently, there is insufficient evidence to indicate that MDR significantly contributed to bolstering residential property investment. The government has now confirmed that Multiple Dwellings Relief is to be abolished and will no longer apply from 1st June 2024.
Any transactions made on or after 1st June 2024 will be required to pay the full amount of the applicable Stamp Duty Land Tax and will not be entitled to any reductions due to multiple dwellings.
Anyone with questions about the auction process can get in touch with their local Auction House team for more information.
*Calculations made using the UK Property Accountants Calculator as a UK resident with a Buy to Let / Second Home.
