17th May 2024

Buyers! Read all about the forthcoming Stamp Duty Land Tax changes

There are changes to Stamp Duty Land Tax (SDLT) coming into effect from 1st June 2024 which might affect your future property purchases and so here, with the help of our friends at Bonham & Brook, we’ve taken some time to unravel and explain the amendments.

As of 1st June, Multiple Dwellings Relief (MDR) will be abolished. MDR is the relief designed to reduce stamp duty when more than one “dwelling” forms part of a single purchase, such as when you buy a house with an annex, a block of flats or a mixed-use property with flats above.

Introduced in 2011, MDR aimed to promote private rental sector (PRS) housing supply and ease the process of investing in residential property. However, an external evaluation by HMRC concluded that the relief was not cost effective against its original objectives and had minimal positive impact on the overall housing or PRS supply. Therefore, it concluded that MDR should be abolished from 1st June.

But what does it mean for my purchase?

Well, for any transactions completing on or after 1st June 2024, MDR won’t be in place. However, MDR will still be eligible for any transactions that exchanged on or before 6th March 2024, regardless of when it completes.

Here are a couple of examples of how it will work for a UK resident purchasing an additional property:

Example 1:
Mr ABC bought a house in May 2024 with a self-contained annex.
Purchase price: £1,000,000
SDLT payable with MDR relief: £25,000

Example 2:
Mrs XYZ is buying a house, completing in July 2024 with a self-contained annex.
Purchase price: £1,000,000
SDLT payable: £41,250

Importantly, the HMRC evaluation found that only 17% of private individuals claiming MDR said they were aware of it before purchasing, indicating that many purchasers possibly weren’t claiming it at all or overpaying it in error. If you believe you have overpaid SDLT, all is not lost – you can claim it back for up to 12 months after your completion date.

If you’re looking to purchase a property this month, these important updates could impact your property transaction. Contact the tax experts at Bonham & Brook on 020 3523 9125 today to ensure you maximise your benefits and navigate these regulatory changes effectively.