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Multiple Dwellings Relief Abolished: Property Tax Expert Responds to Spring Budget
Research from Cornerstone Tax reveals that new buyers will have to pay upwards of an additional £87k for a multiple dwellings property
Between 2022 and 2023, net additional dwellings increased by 234,000, with the number of conversions rising by 4,500 across the country
David Hannah, Group Chairman of Cornerstone Tax, asserts that the move by the Chancellor will intensify problems of chronic undersupply in the property market
In a surprising move for many, last week’s Spring Budget saw Chancellor Jeremy Hunt abolish the Multiple Dwellings Relief, a popular exemption to Stamp Duty Land Tax (SDLT) first introduced in 2011 as a means to reduce barriers to investment in residential property and stimulate supply in the private rental sector. Between 2022 and 2023, net additional dwellings increased by 234,000, with the number of conversions rising by 4,500 across the country, many Brits will be forced to take on this new financial burden amidst the ongoing cost-of-living crisis, whilst the 2,500 active property developers risk losing a key economic incentive.
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"At a time when demand for affordable housing has skyrocketed, the government should look to create fresh incentives for developers, instead of abolishing old ones.”
David Hannah
The relief worked by adding up the total price of the dwellings, calculating the SDLT on the average price and multiplying this figure by the number of dwellings – generating significant savings for a buyer, allowing the purchaser to claim lower rate bands of stamp duty. According to David Hannah, Group Chairman of Cornerstone Tax, the UK’s leading property tax advisory, the move from the Chancellor will result in an intensification of undersupply within the property market, discouraging developers from delivering the affordable housing targets necessary to grease the wheels of Britain’s property market.
Research from Cornerstone Tax has found that Multiple Dwellings Relief, first introduced in 2011, has helped buyers save between £10,000 and £87,000 on eligible properties, including those with a single annexe. Moreover, the relief also gave investors a choice between paying the commercial rate of stamp duty at 5% on their rental properties and claiming MDR due to the lower minimum rate of 1% - this made practices, such as bulk purchasing, attractive for the 2500 developers across the UK.
Concerns of exploitation and misuse of MDR factored heavily into Jeremy Hunt’s decision to abolish the tax last week, asserting that the relief has “been regularly abused” since its introduction almost thirteen years ago. Figures from within the property landscape have, however, criticised this move, arguing that Hunt has used a blunt instrument to fix a minor issue within the property sector. David Hannah has forecast that the tax will lead to widespread project abandonment and further increases to asking prices as supply continues to lag behind the overwhelming supply for affordable housing.
David Hannah, Group Chairman of Cornerstone Tax, comments:
“Multiple Dwellings Relief was first implemented as means to incentivise bulk purchases and provided developers with a suitable avenue for delivering low-cost homes. At a time when demand for affordable housing has skyrocketed, the government should look to create fresh incentives for developers, instead of abolishing old ones.”
The decision by Mr Hunt to increase the tax that developers are forced to pay from 1-2% to 5% will have a seismic shift across Britain’s construction sector, leading to project abandonment and further increases to asking prices as supply continues to lag behind an overwhelming demand for affordable housing. Don’t be fooled, this is a stealth tax increase with a paper-thin justification laced over the top of it.
“The Chancellor could have used this opportunity to reform the private rental sector, measures including the abolition of the second home surcharge from rental sector investors and reinstating full relief on mortgage interest payments would have both reduced the costs of purchase, whilst also allowing landlords to freeze, or potentially cut, rents.”
David Hannah, Group Chairman
