The Spring Budget announced a significant change for property investors: the abolition of the multiple dwellings relief for Stamp Duty Land Tax (SDLT) from the 1st of June 2024. This relief has traditionally supported those purchasing two or more dwellings in one transaction or a series of linked ones.
Introduced in 2011, this relief was designed to stimulate property investment and encourage a robust supply of homes for the private rental sector. It allows buyers to calculate their SDLT based on the average value of the properties they’re acquiring rather than their cumulative value.
To work out the tax rate under this relief, you would:
- Divide the total price paid for the properties by the number of dwellings.
- Calculate the Stamp Duty Land Tax due on that figure.
- Multiply this by the number of dwellings.
However, this always has a minimum rate of 1% of the total purchase price.
Let’s take a couple of examples:
Example 1:
Frank purchases four houses costing £1.6 million. The average price of each property is £400,000. SDLT at residential rates on a property of £400,000 would be £7,500. (0% on the first £250,000 and 5% on the next £150,000).
Therefore, Frank’s total SDLT for all properties would be £30,000. Without the relief, he would otherwise have paid £103,250.
((£250,000 @ 0%) + (£675,000 @ 5%) + (£575,000 @10%) + (£100,000 @ 12%)).
Example 2:
Eloise buys three properties for £600,000 totaling an average of £200,000 per property. With the application of multiple dwellings relief, Eloise must pay a minimum charge of 1% of the total cost, i.e., £6,000.
Without the relief, Eloise would have been facing an SDLT bill of £17,500.
((£250,000 @ 0%) + (£350,000 @ 5%)).
The impact of changes in June 2024
However, following a government consultation, it has been decided that the relief will cease to exist from the 1st of June 2024 because it was determined that the impact on the supply of homes for the private rental sector was insignificant and it was not cost-effective.
The abolition will not affect transactions where contracts were exchanged on or before the 6th of March 2024, even if the completion date is after 1 June 2024.
Additionally, if multiple homeowners have linked transactions that span both before and after the 1st of June 2024, only those completed before the cut-off will qualify for the relief.
Ultimately, the elimination of this relief is set to considerably increase the Stamp Duty Land Tax payable on the purchase of multiple dwellings. As per the examples mentioned, Frank would pay an additional £73,250, and Eloise would be set back by another £11,500 following the reform.
We Can Help
If you need help managing your tax obligations for properties you own, or want help managing the tax for your property portfolio we can help. Get in touch with our friendly team today on 01704 891677 or info@stseurope.co.uk and request your free initial consultation.
