Stamp Duty is something that we all must consider when buying a property, it is commonly discussed when budgeting, and can have a significant impact on whether or not you are able to proceed to making that eagerly anticipated offer to buy.

Unlike first time buyers’ relief, or even the increased rate charged on an additional property, buyers are often unaware of what Multiple Dwellings Relief is, and how/if they may be able to benefit from it.

Multiple Dwellings Relief (MDR) is available to those that acquire two or more dwellings in a single transaction, or in a linked transaction, and as with any tax relief it will reduce the tax payable by you.

A common misconception is that this relief is only available in the rare instance that you decide to buy neighbouring properties that were built and constructed independently, and more often than not are also bought separately (e.g. three standard neighbouring 2 bedroom houses on a housing estate). However, a much more common occurrence yet one which buyers do not consider, is when you are buying a property with an annexe or outbuilding.

You could qualify for MDR on the basis that the annexe/outbuilding can be classed as a separate dwelling from the ‘main dwelling.’ To be considered a separate dwelling it must be appropriate or fit for use as a separate self-containing living unit, the following characteristics may demonstrate that:

• Having its own lockable entrance
• Having its own kitchen and bathroom area
• Having its own living and sleeping area
• Having its own privacy and security from other dwelling

The relief is calculated as follows:-

• Divide the total amount paid for the properties by the number of dwellings.
• Work out the tax due on this figure.
• Multiply this amount of tax by the number of dwellings.

The minimum rate of tax under the relief is still 1% of the amount paid for the dwellings.

Example

No Relief - You buy one additional property (not replacing your main residence) for £500,000.00. The Stamp Duty Payable on this is £27,500.00.

MDR Relief - You buy an additional property (not replacing your main residence) which comes with an annexe used as a separate dwelling for £500,000.00. Dividing the £500,000.00 by the two dwellings gives you £250,000.00. Stamp Duty payable on £250,000.00 is £7,500.00, multiply that by two, equals £15,000.00 payable on this purchase. A welcome saving of £12,500.00.

All calculations and information above are for illustrative purposes only, and each specific transaction would need to be reviewed individually – sometimes with the aid of a SDLT specialist or accountant. If you would like to discuss this or any of your property matters with us, please contact a member of our Property Team.