If you want to invest a certain amount in residential property, buying two or more dwellings together might be more beneficial than buying a single dwelling property. This is because of relief in stamp duty land tax (SDLT) for multiple dwelling transactions. The relief does not automatically apply and must be claimed.
Note: A dwelling refers to a house or a part of house suitable for a household to live safely, securely and independently. They must have exclusive access to basic facilities like washing, cooking etc.
How can I benefit from MDR?
MDR is a generous relief available for investors in the UK property market . There are some tax benefits a property buyer can get from MDR.
For example,
Propco invests on single dwelling for £1.5 million. With regular SDLT rates, the total SDLT payable would be £91,250 (0% until £250,000, 5% for next £675,000, 10% for remaining £575,000).Had he bought five flats for £1.5 million (instead of single dwelling), his SDLT (if MDR claimed) would be £15,000 (as he could use the initial rate of 1% for five times of £250,000 i.e., 5*£250,000*1% and nothing would be left for higher rates). So, he could save, £76,250 (£91,250 – £15,000).
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What are the criteria for eligibility of MDR?
The relief applies where the transaction contains at least two dwellings.
It applies when you buy two separate houses or apartments or flats in one transaction. A mixed-use property (partly used as residential and partly as commercial) also qualifies for MDR. And it also applies when you buy a house that contains two or more dwellings (e.g., a main house with self-contained annex or “granny flat”).
The dwelling must also meet the following conditions :
- It must be suitable to live in at the time of the sale.
- It must provide basic facilities like cooking, washing bathing, sleeping etc.
- The occupants must be able to enjoy privacy and security (for example, the main door must be lockable, there should not be other interconnecting doors etc).
Visit Multiple Dwellings Relief- A Complete Guide for more details.
Who Can’t Claim Multiple Dwellings Relief?
The relief cannot be claimed where:
- The dwelling is higher threshold interest such as ATED related 15% SDLT.
- SDLT group relief, reconstruction relief, and acquisition relief could be claimed.
- There is an exercise of collective rights to buy by tenants of flats.
- Charites relief could be claimed.
- Crofting community rights to buy are exercised.
