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Merits and Demerits of Multiple Dwellings Relief (MDR) for Property Owners


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Table of Content

Table of Content

Multiple Dwellings Relief (MDR) is a tax relief available to landlords who purchase properties with multiple dwellings, such as a house divided into flats or a building with several apartments.

The government introduced the relief to encourage the development and investment in residential properties. MDR can offer significant tax savings, but like any tax relief, it also has downsides.

In this article, we will explore the advantages and disadvantages of MDR and how it can impact property owners and investors.

Advantages of Multiple Dwellings Relief

By taking advantage of MDR, you can reduce your Stamp Duty Land Tax (SDLT) liability, save money on mixed-use properties, and even apply non-residential SDLT rates to certain transactions.

Moreover, by claiming MDR you can link multiple transactions and enjoy tax savings across the board. So why not explore the advantages of MDR and see how it can benefit your property.

Here are some of the advantages of MDR for property owners:

Reduced SDLT

MDR can significantly reduce the amount of Stamp Duty Land Tax (SDLT) that property owners are required to pay when they purchase a property.

SDLT is typically calculated based on the purchase price of the property. Instead of using the property’s total worth to determine tax liability, MDR enables property owners to do so based on the number of dwellings purchased.

As a result, the SDLT rate is calculated using the price amount divided by the number of dwellings. This can result in significant tax savings for the property owners

For Example, 

Mr. Smith purchased four flats for £600,000, which means that the average price of each flat is £150,000.

Normally, the SDLT payable on the purchase of residential property would be £35,500 but with Multiple Dwellings Relief (MDR), each flat is treated as a separate purchase. This results in a lower SDLT rate. The total SDLT paid with MDR is only £18,000, saving £17,500 compared to the normal rate.

Tax Savings on Mixed-Use Property

When a property is a mixed-use property, meaning it is part residential and part non-residential, MDR can only be claimed for the residential portion of the transaction, and the non-residential portion is subject to normal non-residential SDLT rates.

Non-residential property SDLT rates are lower than residential property SDLT rates.

As a result, by using non-residential SDLT rates for the non-residential portion and claiming MDR for the residential portion, property owners can save on tax.

Option to Apply Non-residential Stamp Duty Rates

If a property owner purchases six or more dwellings in a relevant transaction, they are given the option of applying non-residential SDLT rates or claiming MDR.

A relevant transaction is one in which there is a superior interest in the property, including dwellings

As previously stated, because non-residential property SDLT rates are lower, property owners can weigh which is more advantageous : Non-Residential Property SDLT rates or claiming MDR.

SDLT Rates for UK Resident

Residential Property

Purchase PriceSDLT Rate for a Single PropertyAdditional Rate
Up to £250,0000%3%
£250,001 to £925,0005%8%
£925,001 to £1.5 million10%13%
Over £1.5 million12%15%

Non Residential Property (Freehold)

Purchase PriceSDLT Rate
Up to £150,0000%
£150,001 to £250,0002%
Over £250,0005%

Check out our Stamp Duty Rates UK 2022/23 to know more about SDLT Rates.

Linked Transactions

A linked transaction under stamp duty land tax (SDLT) is where the same purchaser and seller undertake multiple property transactions.

Multiple Dwellings Relief (MDR) is available on linked transactions, making property transactions involving multiple dwellings more cost-efficient. 

This can simplify the entire investment process while saving property owners time, money, and resources.

Disadvantages of MDR

Despite its advantages, MDR also has some disadvantages that property owners should be aware of. Some MDR drawbacks include the following :

HMRC Enquiry and Assessment

Let’s face it, applying for MDR relief is more complicated than it appears. For instance, MDR has its own definition of “Dwelling” and tax tribunals and higher courts have considered several cases to determine whether the property qualifies as a dwelling for the purposes of relief.

As HMRC is tightening down claims of MDR, it is advised to get assistance from a qualified tax advisor who can help you properly identify, relief claims and avoid possible pitfalls.

Penalties for Errors

Property owners must generally submit land transaction returns within 14 days of the completion date of the property transaction.

A penalty may be imposed on property owners who understate their SDLT liability due to careless or deliberate inaccuracy in a land transaction return

The maximum penalty for careless action is 30% of the liability to SDLT, with the penalty increasing to 100% if the action is deliberate and concealed.

Complex Rules

Given how specific and complex the rules and regulations governing MDR are, understanding them can be difficult and confusing, particularly for those who are not familiar with tax.

As a result, this can make it difficult for property owners to determine whether they are eligible for MDR and how to claim the relief.

Increased Administration

The administrative burden can definitely be one of the major burdens for the property owners that comes with claiming MDR relief. This is because it requires property owners to keep detailed records of their rental income and expenses and submit them to HMRC each year.


While MDR can be a beneficial tax relief for landlords with properties consisting of multiple dwellings, it’s crucial to get expert guidance to ensure relief is being claimed correctly.

Additionally, landlords must make sure they are meeting all applicable tax laws and requirements for claiming MDR.  

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Contact us for assistance at any stage of your journey.

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Merisha Shrestha

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