George Osborne first announced a 3% stamp duty surcharge on second homes and buy-to-let properties in the 2015 Autumn Statement, and this was implemented in April of this year. The only exemption to the surcharge is where the property is sold for less than £40,000 – so it effectively catches the vast majority of properties.
However, for landlords and property investors that are able to buy more than one property at the same time, ‘Multiple Dwellings Relief’ can cut stamp duty liability by a significant margin.
Multiple Dwellings Relief (MDR) has been around since 2011 and is a legitimate tool for reducing exposure to stamp duty land tax. It allows landlords to offset the stamp duty surcharge if they are buying two or more properties in the same or linked transaction – ie: between the same purchaser and the same seller.
Note that MDR is not applicable on any property that has a superior interest – ie: you must be buying the freehold for it qualify as a relevant transaction for the relief. (MDR will still be calculated over the remaining dwellings that do qualify.)
If MDR is claimed, there is an overriding minimum 1% of stamp duty payable. This 1% is calculated on the total price of all properties being purchased in the same transaction.
Additionally, where six or more dwellings are purchased in a single transaction, the buyer can apply the much lower commercial rates of stamp duty.
With larger numbers of dwellings purchased in the same transaction, the stamp duty savings can be considerable.
This was highlighted in a recent acquisition by a Clayton & Brewill buy-to-let landlord client, where we were able to reduce their stamp duty bill from £12,000 to just over £4,000.
With stamp duty changes and the phased removal of relief on mortgage interest costs, it’s increasingly important for buy-to-let landlords and property investors to seek specialist accountancy advice.
Clayton & Brewill provides audit, tax and advisory services to individuals, owner managed businesses and SMEs across the Midlands, from its network of offices across the region in Nottingham, Long Eaton and Melton Mowbray.
If you found this article useful, you might also want to read:
Tax changes for buy to let landlords (July 2015)
Landlords stamp duty surcharge explained (December 2015)