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Navigating UK Tax Laws for Multiple Dwellings Relief

Published by UK Property Accountants
Published Date: May 11, 2023
Categories: MDR

Stamp Duty Land Tax (SDLT) is a tax that is levied on property transactions in the United Kingdom. The legislation that governs SDLT is set out in the Finance Act 2003 and subsequent amendments.

Under the SDLT legislation, individuals and companies are required to pay tax on the purchase or transfer of land and buildings in the UK. The amount of tax payable is based on the purchase price of the property, and the tax rates vary depending on the value of the property.

There are various reliefs available to reduce stamp duty land tax but the one we are talking about in this article is Multiple Dwellings Relief (MDR).

Multiple Dwellings Relief and its Legislative Background

representing the examination of property for multiple dwelling

The legislation for Multiple Dwellings Relief (MDR) is outlined in the Finance Act 2003, Schedule 6B.

MDR is a tax relief scheme that is designed to reduce the amount of Stamp Duty Land Tax (SDLT) that property owners and investors need to pay when purchasing a property that consists of multiple dwellings.

Before we discuss about Multiple Dwellings Relief lets look at Stamp Duty Land Tax (SDLT)

Under the MDR legislation, each dwelling in a property is treated as a separate transaction for the purpose of calculating the SDLT. This means that the SDLT is calculated based on the value of each individual dwelling, rather than the overall value of the property.

To be eligible for MDR, a property must consist of two or more separate dwellings. The relief does not apply to properties that are considered to be a single dwelling, such as a house or a flat.

How Much Stamp Duty Land Tax can Multiple Dwellings Relief Save?

Best way to understand this is through an example:

For Example, 

Charles purchased his second property with main house and a granny annex at £2 million. Normally, if he does not claim for Multiple Dwellings Relief he would have to pay the SDLT based on the total price of the property, which would amount to £211,250.

If his property has an annexe attached to it, the annexe can qualify as a separate dwelling for which he can claim for Multiple Dwellings Relief for 2 dwellings, in this condition the stamp duty and land tax chargeable would be £142,500.

Here, Charles saved £68,750 on his stamp duty and land tax bill.

As you can see, Stamp Duty and Land Tax bill can be saved significantly through Multiple Dwellings Relief.

What is Separate Dwelling?

calculation of tax for Multiple Dwellings Relief

The calculation of tax for Multiple Dwellings Relief is dependent on the number of single dwellings within the transaction.

HMRC manual gives different interpretation of what a "dwelling" is, but it's important to know that there's no clear definition in the law itself.

So, in this article we shall discuss based on the available HMRC manual and case study.

HMRC Manual and Case Study

HMRC manual SDLTM00410 gives an insight into requirements of separate dwelling.

There are two different criteria for determining whether a property can be considered a single dwelling or a self-contained area of a larger dwelling. The standard for determining whether a property is suitable to use as a single dwelling is more stringent, than the standard used to determine whether it is a self-contained area of a larger dwelling.

If a building is thought to have more than one dwelling, proof is needed to show that each "dwelling" is independent enough to be considered as its own separate dwelling. For the purpose of calculating the tax for the Multiple Dwellings Relief (Schedule 6B FA2003), the definition of "suitable for use as a separate dwelling" has been taken into account by the courts.

Case to look out for this purpose is Fiander and Brower. The aforementioned decision confirms that the "dwelling" must be adequate for an occupier generally, not merely for a specific type of tenant like a family or squatter. This requires an objective evaluation. HMRC will conduct this test as part of any compliance review, and it was pushed for throughout the First-tier tribunal hearing.

Physical Configurations to Determine How many Dwellings

Physical configurations here mean facilities of dwelling, these attributes are considered to be of great importance when considering use as a separate dwelling.

Some of these facilities are:

  • Sleeping AreaOne might anticipate finding a bedroom area in a home. A reasonable-sized sleeping area should typically feature illumination, power outlets, and a window. Often, it will be set apart from a "living area."
  • Bathroom: A home must have its own laundry and bathroom amenities, which typically comprise a bathtub or shower, a toilet, and a sink.
  • Kitchen: It would be assumed that a house would have a kitchen and a comfortable dining room (not necessarily in the same place). It is not necessary for a kitchen to have a stove or white goods like a refrigerator or dishwasher to be present at the transaction's effective date because these items are occasionally taken out when a house is sold. Nonetheless, there should be room and infrastructure in place, such as a power source for the cooking and piping for the sink.
  • Independent Entrances: Each dwelling needs to have a suitable amount of independent access. This may involve a distinct entrance from the exterior of the structure or from interior common areas, as in the case of apartments. Each dwelling will typically have access to common areas (such corridors and stairs) through a secure door.
  • Privacy and interconnecting doors: A certain amount of separation from adjacent homes is necessary for a single dwelling. Although it is unusual, linking doors between adjacent homes are feasible. It matters whether the door separating the pieces can be secured or is easily secure from both sides.

Other Factors to Consider

HMRC states in its manual SDLTM00430 that following factors also play a role when considering use as a separate dwelling.

  • Control of utilitiesA separate single dwelling should be able to control most of the utility services supplied to them. For example: electricity should be able to switch on or off from within the dwelling or communal area, it is expected that heating system should be manageable from the dwelling without having to go through another dwelling, etc.
  • Legal constraints: Legal conditions which the property may be subject to including any planning restrictions or restrictive covenants should be considered as these can play a major role in determining the ‘suitable use as a dwelling’.
  • Council Tax: When a property is assessed as having several dwellings for council tax reasons, this suggests that there may also be many dwellings for SDLT purposes. As opposed to Stamp Duty Land Tax, council tax uses a different definition of a dwelling, hence this aspect won't be a reliable predictor on its own.
  • Marketing Materials: The marketing materials used by estate agents are a helpful resource when determining the potential number of homes on a property. This information is not conclusive, however, as an estate agent's primary goal is to sell the property, not to provide legally correct definitions of homes.


In conclusion, navigating UK tax laws can be a complex endeavour, especially when it comes to Stamp Duty Land Tax (SDLT).

However, understanding and utilizing the available reliefs can significantly reduce your tax burden. Multiple Dwellings Relief (MDR) is just one such relief that can help save you money.

How can UKPA help?

We at UK Property Accountants have experienced tax advisors who can provide valuable assistance in determining and obtaining multiple dwellings relief. By assessing your eligibility, helping you claim relief, maximizing tax savings, and ensuring compliance, we can help you make the most of this valuable tax relief.

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