In a major shift for UK property tax, Multiple Dwellings Relief (MDR) has been officially abolished as of 1 June 2024. Previously available under the Stamp Duty Land Tax (SDLT) regime, MDR allowed buyers of more than one residential property in a single transaction to claim a discount on their SDLT liability.
This relief often proved financially beneficial for investors, developers, and families acquiring multiple properties together. However, following an extensive consultation by HM Treasury, the government has moved to eliminate MDR, citing inefficiencies and abuse of the system.
The decision stems from concerns that MDR was frequently exploited for tax savings that did not align with the relief's original intention. While the abolition aims to create a fairer and simpler SDLT system, the changes will significantly impact how property transactions are structured and taxed, especially for bulk buyers.
Buyers who exchanged contracts before 6 March 2024, however, can still benefit from MDR under transitional rules. In this article, we explore why MDR was scrapped, who is most affected, and what buyers and professionals need to consider moving forward.
Why Was Multiple Dwellings Relief Abolished?
Multiple Dwellings Relief was introduced to support investment in residential property and to simplify taxation when multiple properties were acquired at once. However, the relief quickly became the subject of scrutiny due to widespread abuse and misuse.
According to HM Treasury's consultation, evidence suggested that MDR was frequently claimed in scenarios where it was not intended to apply. In particular, legal loopholes enabled advisers to market aggressive tax planning schemes, sometimes involving properties with annexes or non-self-contained units, to qualify for unjustified tax breaks.
The government found that the relief was often claimed where there was no real benefit to the housing market or economy, thereby eroding the tax base. Following these findings, HMRC concluded that MDR was not meeting its original policy objectives and that its continued availability created unfair tax advantages.
Key Dates and Transitional Rules
The abolition of MDR took effect from 1 June 2024. However, transitional arrangements are in place to protect transactions where contracts were exchanged before the Spring Budget announcement on 6 March 2024.
This means that if a buyer exchanged contracts before 6 March and completes on or after 1 June, they may still claim MDR, provided no substantial contract changes have occurred since the exchange.
Taxpayers should exercise caution, as any variations to the terms post-exchange, such as changes in consideration, parties, or the nature of the transaction, could disqualify the deal from MDR under these transitional provisions.
Impact on Investors and Developers
Property investors and developers are among the groups most affected by the end of MDR. The relief previously allowed them to reduce their overall SDLT costs when acquiring portfolios or blocks of flats, making bulk purchases more financially viable.
Without MDR, buyers of multiple residential units will now face higher SDLT bills, calculated using the total consideration rather than averaging the rate across properties. This change could reduce appetite for bulk residential purchases and introduce higher transaction costs for those operating in the buy-to-let or development sectors.
Advisers working with these clients must now revisit planning strategies and consider alternative reliefs or structures, such as the use of mixed-use property classifications, though these may also come under closer HMRC scrutiny.
Practical Implications for Homebuyers
While the primary impact falls on professional buyers, some private individuals could also be affected. For example, families purchasing a home with a separate annex or acquiring a home and flat for children or relatives previously used MDR to reduce tax liability.
Now, such buyers must prepare for higher SDLT charges, unless the annex qualifies under other reliefs or exemptions. It’s important for homebuyers to seek early advice to understand the full tax consequences before entering into property transactions involving multiple dwellings.
In many cases, what was previously considered standard planning may now fall outside HMRC's acceptable scope, increasing the risk of errors or unexpected liabilities.
Legal and Professional Sector Reactions
Legal professionals and tax advisers have voiced concern about the sudden abolition, warning of confusion and potential disputes over eligibility during the transitional period.
According to Saffery, "While MDR had its flaws, its removal without a clear replacement may cause disproportionate tax burdens and disrupt transactions in progress." Many professionals are urging HMRC to issue clear guidance on how transitional rules apply and how to handle partially complete transactions.
There is also concern that the abolition may drive more taxpayers toward aggressive planning in other areas of SDLT unless a broader reform is introduced. The call for a comprehensive SDLT review is gaining traction across the property and legal sectors.
Conclusion
The abolition of Multiple Dwellings Relief marks a significant shift in how property transactions are taxed in the UK. Although it aims to prevent abuse and simplify SDLT, the move may increase costs for investors and families alike. Those involved in multi-dwelling transactions must now carefully plan and seek professional guidance to navigate the post-MDR landscape.
While the relief’s removal may seem abrupt, it reflects HMRC’s growing focus on fairness and enforcement within the UK tax system. Buyers and advisers alike should stay alert for future reforms or replacement reliefs that could reshape the property tax space.
Frequently Asked Questions
What was Multiple Dwellings Relief (MDR)?
MDR was a stamp duty relief allowing buyers to reduce their SDLT by calculating tax based on the average price per dwelling, rather than the total consideration.
Why was MDR abolished?
It was scrapped due to widespread misuse and because it no longer served its original purpose of supporting residential investment fairly.
When did the abolition take effect?
MDR was abolished from 1 June 2024, with transitional rules for contracts exchanged before 6 March 2024.
Can MDR still be claimed on older transactions?
Yes, but only if the exchange of contracts occurred before 6 March 2024 and no substantial changes were made to the contract.
Will there be a replacement for MDR?
As of now, no replacement has been announced. However, calls for a broader SDLT review may lead to future reforms.
