It is understood that MDR was introduced to encourage investment in residential property and improve the private rental sector.

What is MDR?

MDR is a relief in the SDLT which may apply to the purchase of two or more residential properties in one single transaction or residential properties purchased in linked transactions.

Examples of those who may benefit include (i) those buying properties with a “granny annex” or some other subsidiary residential buildings or (ii) those purchasing numerous residential dwellings at the same time or (iii) the purchase of a new block of flats by an investor.

Provided that the main dwelling is 2/3 or more of the total value then MDR allows purchasers to pay SDLT on the average price of each dwelling.

Such relief can result in significant savings for those individuals purchasing multiple properties as they could get the benefit of two or more lower rate bands of SDLT.

Why is MDR being scrapped?

The government confirmed that the relief had not promoted investment in the private rented sector as they had hoped but instead led to a rise in incorrect or dishonest claims of MDR relief. Notably, where individuals had applied for MDR in purchases which were not intended to benefit from the same.

Furthermore, the introduction MDR led to the emergence of an industry whereby firms were approaching previous purchasers with claims that they had overpaid in SDLT and were entitled to a rebate. Many of these rebates involved the improper application of MDR.

What does this mean for my purchase?

Fortunately, those properties which exchanged contracts on or before the 6 March 2024 will benefit from the relief irrespective of when they complete; provided that there is no variation to the contract after the 6 March 2024.

For those properties who have not yet exchanged, they will need to ensure they complete before the 1 June 2024 to qualify for MDR.

Impact on the property market

It is thought the removal of MDR will not substantively impact the residential property market where MDR is rarely applicable, however, there are concerns on the impact for smaller property investors or developers who unfortunately were the parties who benefitted from the relief through proper application. Larger investors who purchase at least six dwellings will of course benefit from lower non-residential SDLT rates if they exercise their option to do so.