Multiple Dwellings Relief: Save £££ On Stamp Duty

Multiple Dwellings Relief: Save £££ on Stamp Duty

Stamp Duty Land Tax is a significant cost driver for property investors. The tax on property transactions can soon add up, particularly on higher value properties and where the investor is liable to pay Stamp Duty Land Tax at the higher rate. This article will explore ways that savvy investors can save on Stamp Duty Land Tax when purchasing more than one property at a time through a relief known as multiple dwellings relief.

Stamp Duty Land Tax Rates

If you are buying more than one property in the same transaction or a linked transaction you can benefit from Multiple Dwellings Relief for Stamp Duty Land Tax purposes. This relief is based on calculating an average price and Stamp Duty Land Tax for each of the properties rather than simply calculating Stamp Duty Land Tax based on the total price. This can result in significant savings as one single large transaction could result in an investor paying a higher % of SDLT than if they had a number of smaller transactions.

Calculating Multiple Dwellings Relief. In order to calculate Multiple Dwellings Relief the total price of the transaction is divided by the number of properties. An average value is calculated by dividing this number by the number of properties. Stamp Duty Land Tax is then calculated based on the average price and multiplied by number of properties to calculate total Stamp Duty Land Tax liability.

Examples. The relief is best explained with a simple example. Mrs Jones is purchasing 3 houses from a tired landlord which are treated as part of the same (or linked) transaction. The transaction is taking place post 1 Oct 21 and Mrs Jones already owns property and therefore will pay SDLT at the higher rate. She is a UK resident.

Example 1 no relief claimed:

3 x properties £200k each.

Total value of transaction £600k.

Calculation:

Example 2 Multiple Dwellings Relief claimed:

3 x properties £200k. Average value of property = £200k

Average SDLT calculation:

Multiplied by the number of properties, x 3 = £22,500k.

The result is a £15.5k, 41% saving. Note that the lower percentage of Stamp Duty Land Tax is paid when calculating the average transaction value rather than treating the transactions as one large one which created the savings. Note for transactions where the properties are of even higher value, the relief may prevent the requirement to pay multiple dwellings relief at the highest rate of 15% if the average property value remains below this threshold.

Will my solicitor apply it automatically? Investors should not assume that their conveyancers will understand Multiple Dwellings Relief and may default to the less favourable treatment as one single transaction. This could create unnecessary tax charges for the investor.

Purchasing more than 6 Properties. Where an investor purchases 6 or more properties the purchaser can choose whether to apply Multiple Dwellings Relief using higher residential rates or to apply non-residential rates without Multiple Dwellings Relief. This has the potential to create significant savings on such a transaction as the table below showing non residential rates of stamp duty will hopefully demonstrate: