The complete guide to Multiple Dwellings Relief – Save on Stamp Duty

Posted 10th February 2023 by ctatax-admin

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for property tax advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty

A Complete Guide to Multiple Dwellings Relief

What is it?

Multiple Dwellings Relief, (MDR) but frequently referred to as “Granny Annex Relief”, is a provision in Stamp Duty legislation introduced in 2011. Put simply, where someone is buying more than one residential dwelling in a single transaction (or a series of transaction )– for example a block of flats – MDR acts to potentially reduce the total Stamp Duty bill paid by the buyer.

The Relief was introduced to relieve the punitive rates of tax being paid by buyers of multiple units that meant that they actually paid a higher rate of SDLT on a bulk purchases than if individual units had been bought.

How does it work?

When multiple residential properties form part of the same transaction, the application of MDR means that the Stamp Duty is calculated in a different way. Rather than calculate the SDLT due on the total price being paid for all the properties, an average value is taken of all the properties involved. This average value is then used to calculate the Stamp Duty due on each property. This is then added up to arrive at the total due.

Apart from the obvious advantage of producing a fair rate on each property there are advantages which can arise from transactions where the values of the various component properties are significantly different from one another.

Read: Top stamp duty saving tips for landlords

Who is this relevant to?

On the face of it, portfolio investors looking to add to a BTL portfolio and developers buying larger collections of property for renovation and/or redevelopment. But over the last few years, another growing market has emerged to which MDR might also apply – annexes.

As the cost of living continues to rise, the first rung of the property ladder gets higher and further out of reach for younger people and the older generations continue to live longer, multi-generational households are becoming more common.

This often results in a ‘Granny Annexe’ – some separate dwelling forming part of the overall property in which elderly relatives or youngsters saving for a deposit can live. If that annexe is sufficiently separate from the main house, then it may count as a completely separate dwelling, and make the purchase of the property as a whole eligible for MDR.

What should I look out for?

Where the property isn’t immediately obviously subject to MDR (blocks of flats for example), other factors become relevant. At the top end of the market, larger houses with multiple smaller cottages or flats in the grounds, etc will potentially qualify for example.

At the lower end of the market, you must look carefully at the property itself. Does the annexe have its own lockable entrance? Does it come with its own separate bathroom and kitchen? Is it, in effect, a separate dwelling from the main home?

Read: How much stamp duty do I pay on a second home?

How much could I save?

As above, the size of saving will depend on the price paid and the number of annexes (“subordinate dwellings”).  Each annexe could save anything from £50,000 – £87000 depending on the priced being paid.

What do I do next?

As with any tax matter, the best way to ensure that you pay the right amount and avoid lengthy debate with HMRC is to employ the services of a professional. Cornerstone has focused exclusively on Stamp Duty Land Tax since the tax was introduced in its current form in 2003, and we are the U.K.s foremost experts and leading commentators on SDLT matters.

Cornerstone Tax is the UK’s leading property tax advisers, specialising in Stamp Duty Land Tax. We’ve reclaimed over £15 million in overpaid SDLT in the last 12 months. Contact us for property tax advice, or to see if you are eligible to claim a refund from HMRC on overpaid Stamp Duty