Abolishing Multiple Dwellings Relief will intensify problems of chronic undersupply in the property market, according to tax expert David Hannah.
Last week’s Spring Budget saw Jeremy Hunt scrap the popular exemption to Stamp Duty Land Tax (SDLT) first introduced in 2011 to reduce barriers to investment in residential property and stimulate supply.
Cornerstone Tax’s group chairman (pictured right) explains that between 2022 and 2023, net additional dwellings increased by 234,000, with 4,500 new conversions. 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 them to claim lower rate bands of stamp duty.
This helped buyers save between £10,000 and £87,000 on eligible properties, including those with a single annexe. It also gave investors a choice between paying the commercial rate of stamp duty at 5% on their rental properties and claiming Multiple Dwellings Relief due to the lower minimum rate of 1%. It made practices, such as bulk purchasing, attractive for the 2,500 developers across the UK.
According to Hannah, the change will result in widespread project abandonment and further increases to asking prices as supply continues to lag behind the overwhelming supply for affordable housing.
“Don’t be fooled, this is a stealth tax increase with a paper-thin justification laced over the top of it,” he says. “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.”
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