Spring Budget 2024: Chancellor ends multiple dwellings relief for stamp duty land tax

Multiple dwellings relief (MDR) is a relief in the stamp duty land tax (SDLT) regime which can reduce the amount of SDLT paid when buying two or more residential properties in the same or a linked transaction. In the commercial context, a typical example would be the purchase of a new block of flats by a real estate investor.

When claimed, MDR can help to reduce the SDLT so that it broadly aligns with what would have been payable had the properties been purchased individually from different vendors in separate transactions.

Perception of abuse

MDR was introduced in 2011 to reduce a potential barrier to investment in residential property and promote housing supply in the private rented sector. However, following perceived abuse of the rules, HMRC published a consultation (which closed in February 2022) looking to reform it.

The consultation also looked at the use of the rules for "mixed-property" transactions (that is, purchases which consist of both residential and non-residential property) and sought views on a new apportionment method of calculating the tax (meaning that the residential portion of a mixed-property purchase would be taxed as residential property, and the remaining non-residential portion of the purchase would be taxed as non-residential property).

Following the outcome of that consultation and an external evaluation commissioned by HMRC, the government concluded that there was "no strong evidence" that MDR was meeting its original objectives. As a result, the chancellor announced in the Spring Budget on 6 March 2024 that MDR will be abolished for transactions with an effective date on or after 1 June 2024. Contracts that were exchanged before 6 March 2024 will remain eligible for the relief regardless of when completion occurs, provided that there is no variation of the contract.

In relation to the rules for mixed-property transactions, following feedback received during the consultation, the government decided not to make any legislative changes to the current rules.

Osborne Clarke comment

How MDR was used was clearly on HMRC's radar, shown by its consultation on reforming the rules, but its abolition still comes as a surprise. None of the four options to reform MDR outlined in the consultation included one to abolish the regime. It may be that a combination of the raft of recent case law around the application of MDR and growing attention on tax reclaim agencies encouraging individuals to submit dubious claims for the relief, along with the government-commissioned external evaluation of MDR, led to its abolition.

The benefit of claiming MDR had also already been eroded for certain investors prior to this announcement. The potential for one or both of the 3% surcharge for higher-rate transactions and the 2% non-resident SDLT surcharge for non-resident purchasers applying often meant that it was not beneficial to claim the relief, particularly if the purchaser was non-resident. The cost benefit that may have arisen for UK purchasers over non-residents will now be removed. 

However, for investors there were certain transactions where MDR could be claimed without the 3% higher-rate surcharge arising (for example, certain types of student accommodation and mixed-use properties) and these will be affected most by the change.