When multiple dwellings relief (MDR) is scrapped from 1 June 2024, it will primarily impact those purchasing properties with a ‘granny annexe’ and landlords of multiple properties, warns Chris Etherington, a tax partner at RSM in Leeds.
Affected buyers will be pushing to get their property transactions completed before the weekend.
“Failure to do so [complete transactions] could leave some facing the prospect of a much higher stamp duty land tax (SDLT) bill due to the abolition of multiple dwellings relief (MDR),” Etherington wrote in a piece for Accountancy Daily.
“Similar reliefs are still currently available in Scotland and Wales, although earlier this year the Welsh government consulted on proposals to abolish land transaction tax relief for multiple dwellings,” he added. “MDR has been a niche but very important SDLT relief. It currently may apply for those buying homes with a ‘granny annexe’ and where buy-to-let landlords are looking to transfer their rental property portfolio to a company or third-party purchaser.”
The chancellor’s decision to abolish multiple dwellings relief for stamp duty land tax was among a raft of property tax reforms announced in the Budget statement in March.
Jeremy Hunt said stamp duty relief for people who purchase more than one dwelling in a single transaction was intended to support investment in the private rental sector.
But an external evaluation found no strong evidence that it had done so and that it was being regularly abused and as a result, the chancellor announced that he was going to abolish the relief.
These changes will end the debate over what is a separate “granny flat” or annex. It is also worth noting anything that has already exchanged is protected.
Etherington offers the following example:
“Many properties benefitting from separate annexed accommodation will be detached. The latest land registry statistics indicate that the average cost of a detached house in the UK was around £440,000 in March 2024.
“According to estimates from Checkatrade, the cost of building a ‘granny annexe’ in 2023 could be as much as £100,000.
“For the purposes of our calculations, we have used an estimate of £550,000 to represent the cost of an average detached property with a separate granny annexe within its grounds.
“The standard SDLT payable on a purchase for £550,000 would be £15,000 assuming first time buyers’ relief does not apply, and the acquirer does not already own another residential property.
“By comparison, if MDR was available then the SDLT payable could have been as low as £5,500.
“So, the SDLT due from 1 June 2024 could be significantly higher and, in this example, as much as a 273% increase.
“This increase in SDLT could act as a significant disincentive for families considering buying a home with a separate annexe and act as a further constraint in freeing up housing stock for younger buyers.”
The removal of the multiple dwellings SDLT relief ‘does far more good than harm’
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