MDR is a Stamp Duty tax relief regime that can apply to both individuals and businesses buying more than one dwelling in one transaction. It allows purchasers to calculate the tax based on the average value of the dwellings purchased as opposed to their aggregate value. This has been a valuable tax saving for purchases buying larger residential properties with a separate annex, sometimes including a so-called “granny flat” (assuming that all of the relevant conditions for MDR were satisfied in the particular case), however it is now being scrapped after perceived abuse.

The abolition follows an HMRC consultation in 2022. The rules for mixed-use properties were also looked at (i.e. those with both residential and non-residential elements) however the Government has decided not to make any changes to the current legislative rules.

One of the reasons for the abolition of MDR is that the Government has also concluded that it only had a minimal impact on the housing supply overall and that the relief no longer achieves its original aims. Another, probably more significant, reason is that the abolition is expected to raise £220 million in 2025/26 and over £300 million in subsequent years.

It should be noted that contracts that were exchanged before 6 March 2024 will remain eligible for the relief regardless of when completion occurs, provided that there is no variation of the contract.

In conclusion, removing MDR will provide clarity for buyers (and lawyers) and will simplify Stamp Duty calculations. Property lawyers are unlikely to shed a tear over its demise, particularly as an industry of ‘SDLT reclaim agents’ emerged, akin to the Stamp Duty equivalent of ambulance chasers, as a result of the relief being rarely clear cut. They often contacted buyers after completion, suggesting that MDR could be claimed as part of the property constituting a separate dwelling, leading to spurious “granny flat” claims. However, it is worth bearing in mind that there is no statutory definition of “suitable for use as a single dwelling” and this ultimately meant that buyers could not always be certain as to whether they had a valid claim for MDR or not.

For further advice on this MDR matters, or any property related legal advice, please contact our experienced Residential Conveyancing team.

Article written by Property Solicitor Ben James.

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