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Multiple dwellings relief (MDR) for stamp duty land tax (SDLT) was abolished for transactions completing on or after 1 June, with a potential exception where purchasers had exchanged contracts prior to 7 March 2024. This previous article considered the implications of the abolition for individuals purchasing properties with a ‘granny’ annexe. However, the abolition of MDR will likely have bigger ramifications for businesses who frequently undertake residential property transactions involving multiple dwellings, like property developers or landlords. 

SDLT only applies to transactions involving properties situated in England or Northern Ireland. Properties in Scotland are instead subject to land and buildings transaction tax (LBTT) and properties in Wales are subject to land transaction tax (LTT). Whilst these taxes are all fundamentally similar, there are subtle differences between them. 

Whilst MDR for SDLT was withdrawn under the premise of reducing abusive tax claims and improving fairness, the withdrawal of this tax relief will likely result in increased SDLT charges for businesses that acquire multiple dwellings in a single transaction or connected transactions. This abolition has highlighted the disparity between residential and non-residential SDLT rates, with residential rates currently reaching as high as 12% (or 17% including surcharges) compared to non-residential rates which do not exceed 5%. 

Following the abolition of MDR for SDLT, individuals and businesses acquiring between two and five residential properties in a single transaction are likely to incur a higher SDLT bill on purchase. However, those acquiring six or more dwellings in a single transaction, or connected transactions, may not even notice a difference to the SDLT cost due to the ‘six dwellings rule’, which allows a transaction involving six or more dwellings to be subject to the non-residential rates of SDLT. 

Landlords may have been considering incorporating their property portfolios in an attempt to improve the viability of their letting businesses, which may have been severely impacted by rising borrowing costs on which they can only claim restricted tax relief. The property stamp tax charge on transferring properties to a company may, however, present a barrier to incorporation. 

Since it was announced that MDR for SDLT was to be abolished, there have been no announcements from the Scottish Government regarding MDR for LBTT. However, the Welsh Government has consulted on MDR for LTT, questioning whether both MDR and the six dwellings rule should be abolished for LTT. 

It seems likely that MDR will be abolished for LTT and LBTT in the near future, putting those taxes broadly on a level-footing with SDLT. However, the withdrawal of the six dwellings rule for any of the property stamp taxes may be particularly challenging for property business owners, as the property tax stamp cost on a transaction involving six or more dwellings could just about treble.

For now, property business owners may wish to factor in potential changes to property stamp taxes, when determining the viability of any proposed transactions. Differing approaches by devolved governments over their respective property stamp taxes could result in certain countries in the UK becoming much more attractive for property developers and landlords, at least from a tax perspective.