Following the spring budget announcement on the 6th March 2024, the chancellor announced that from 1st June 2024, Multiple Dwellings Relief will be abolished, unless you exchanged on or before the 6th March 2024 in which case you can still claim the relief.
What is Multiple Dwelling Relief:
Multiple Dwellings Relief is currently available where the main subject matter of a transaction contains at least two dwellings. These can be purchased in linked transactions or in one transaction. Linked transactions are currently defined by HMRC as;
- If there’s more than one transaction
- If the transactions are between the same buyer and seller or between people connected with either of them. Connected persons – If the buyer or seller is a business, a connected person would be a business partner and their relatives. It also includes companies and groups of companies who are connected to the business.
- If the transactions are part of a single arrangement or scheme or part of a series of transactions
The relief is applied by taking the average purchase price of the linked transactions and calculating the stamp duty on this figure which you then pay on the linked transactions.
What implications does the removal of multiple dwelling relief mean for me:
This could become quite costly for investor clients who have previously bought multiple properties from the same developer as they will now need to pay the higher rate of stamp duty on each property as opposed to benefitting from the relief. The current higher rates of stamp duty are as follows
- Up to £250,000- 3% SDLT payable
- From £250,001 to £925,000- 8% SDLT payable
- From £925,001 to £1.5 million- 13% SDLT payable
- Any price over £1.5 million- 15% SDLT payable
It is important to note the higher rate of stamp duty will apply where you will own more than one property on completion. There is an exception to this rule, where if you are selling your main residence and your new purchase is replacing this, even if you own an additional property such as a buy to let, you can still pay stamp duty on the normal rate for your new purchase.
There are other matters which can effect the stamp duty payable which we will discuss briefly below;
Non- Residential Property Transactions;
Stamp Duty will be payable on non-residential property transactions when you pay £150,00.00 or more for land or property that is classed as non-residential or mixed use, this is currently defined by HMRC as;
- commercial property, for example shops or offices
- property that isn’t suitable to be lived in
- forests
- agricultural land that’s part of a working farm or used for agricultural reasons
- any other land or property that is not part of a dwelling’s garden or grounds
- 6 or more residential properties bought in a single transaction
- Mixed Use land or property is one that has both residential and non-residential elements to it, such as a flat connected to a shop, doctor’s surgery or office.
If your transaction falls under this category then the current rates of stamp duty are as follows;
- Up to £150,000- Zero SDLT payable
- From £150,001 to £250,000- 2% SDLT payable
- Any price over £250,001- 5% SDLT payable.
First Time Buyers Relief;
The stamp duty relief for first time buyer’s is still available and HMRC currently define a first time buyer as;
- An individual or individuals who have never owned an interest in a residential property in the United Kingdom or anywhere else in the world and
- Who intends to occupy the property as their main residence.
It is important to note that if you are intending to purchase the property with somebody else, you must
BOTH be first time buyers to benefit from the relief. If you are a married couple and one of you have previously owned a property you will need to pay the stamp duty on the normal rate. This is because you are considered as one unit.
The current rates for first time buyers are;
- Up to £425,000- Zero SDLT payable
- From £425,001 to £625,000- 5% SDLT payable
- For any property with the purchase price over £625,000 you will need to pay the same rates as people who have bought a home before (see below)
Normal Rate of Stamp Duty
If you have previously owned a property, you will not be able to benefit from the first time buyers relief, however the cap for when you start to pay stamp duty has increased over the years and is now as follows;
- Up to £250,000- Zero SDLT payable
- From £250,001 to £925,000- 5% SDLT payable
- From £925,001 to £1.5 million- 10% SDLT payable
- Any price over £1.5 million- 12% SDLT payable
This will only apply if on completion, this property will be the only property you will own and it will be your main residence.
In addition to reliefs stamp duty can be more costly for some. Depending on your situation you may be liable to higher rates of stamp, and these are listed below.
Non-UK Resident rate of Stamp Duty
HMRC currently state that if you’re not present in the UK for at least 183 days (6 months) during the 12 months before your purchase you are ‘not a UK resident’ for the purposes of Stamp Duty.
You will pay a 2% surcharge if you are buying a property in England or Northern Ireland, this surcharge will be in addition to any other rates of stamp duty that apply such as if you are a first-time buyer or if this property will be an additional property. The following sets out an example for both scenarios.
Non-UK resident and a first time buyer;
- 2% SDLT up to £425,000
- 7% SDLT on the portion from £425,001 to £625,000
- For any property with the purchase price over £625,000 you will need to pay the same rates as people who have bought a home before.
Non-UK resident and this will be your only property;
- Up to £250,000- 2% SDLT payable
- From £250,001 to £925,000- 7% SDLT payable
- From £925,001 to £1.5 million- 12% SDLT payable
- Any price over £1.5 million- 14% SDLT payable
Non-UK resident and this will be an additional property;
- Up to £250,000- 5% SDLT payable
- From £250,001 to £925,000- 10% SDLT payable
- From £925,001 to £1.5 million- 15% SDLT payable
- Any price over £1.5 million- 17% SDLT payable
Stamp Duty on a Shared Ownership Purchase
When purchasing a shared ownership property, you will pay stamp duty on the share of the property you are buying and the rates that apply are listed above.
When you are the first owner of a shared ownership purchase such as on a new build, you will have the option on whether you wish to pay the stamp duty on the full market value of the property or on the share of the property you are purchasing.
If you choose to elect paying stamp duty on the full market value, this will mean there are no further stamp duty payments as you staircase. If you are a first time buyer, you could be paying no stamp duty in any event depending on the full market value, making this more cost effective.
If you choose to pay the stamp duty on your share of the property, this will mean you will defer paying some of the stamp duty until you staircase to own more than 80% of the property. This does mean that you could end up paying more stamp duty over time as each time you staircase, depending on the share being acquired and value of the property, you could be liable to make a further payment.
Helpful links
For those wanting to calculate their stamp duty payable HMRC have a helpful calculator which is useable by the public:
https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#!/intro
There are many reliefs available for SDLT and more details can be found on the HMRC website;
https://www.gov.uk/stamp-duty-land-tax/reliefs-and-exemptions
It is important to understand that solicitors are not tax advisors and therefore if you have a complex stamp duty matter it is strongly advised you seek further information from tax advisors.
Please note the figures discussed above are the current rates as at the date of this article and we cannot comment on the speculation regarding stamp duty changes in the Autumn Budget.
How we can help
For further information, please contact us to speak to a member of our Property Team.
