For years, Stamp Duty Land Tax was something landlords considered an incidental expense along with conveyancing fees and estate agent’s costs. But that’s no longer the case.
Three changes in quick succession have pushed SDLT from a line in the completion statement to a factor that can decide whether a purchase goes ahead: the abolition of Multiple Dwellings Relief, the increase in the higher rates for additional dwellings, and the end of the temporary reduction in the SDLT thresholds.
In this article, Sam Stent, Tax Advisory Partner and SDLT specialist explains each change, shows its effect and clarifies one rule that can still work in your favour.
What has changed?
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Multiple Dwellings Relief (MDR) was abolished from 1 June 2024.
MDR mattered because of how it calculated the tax. Rather than taxing a portfolio on its total price, which pushed much of the price into the top bands – it worked out the tax on the average price per dwelling and multiplied that by the number of dwellings, subject to a minimum rate of 1%.
So, for anyone buying several properties together, the saving was often substantial.
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The surcharge on additional dwellings has risen.
The higher rates for additional dwellings, paid by companies and by individuals who already own a residential property, increased from 3% to 5% above the standard rates on 31 October 2024. The higher-rate SDLT bands currently in force are as follows:
- 5% on the first £125,000
- 7% from £125,001 to £250,000
- 10% from £250,001 to £925,000
- 15% from £925,001 to £1.5 million
- 17% above £1.5 million
Non-UK resident buyers pay a further 2% on residential purchases.
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The reduced thresholds have ended.
The residential nil-rate band was reduced from £250,000 back to its previous level of £125,000 on 1 April 2025. So, for landlords paying the higher rates, the slice of the price between £125,001 and £250,000 is now taxed at 7% rather than 5%, adding SDLT of £2,500 to every purchase above £250,000.
The combined effect: a single buy-to-let
Consider a landlord who already owns property and buys a £300,000 buy-to-let.
Before 31 October 2024, with a 3% surcharge and a £250,000 threshold, the calculation was:
- 3% on the first £250,000: £7,500
- 8% on the remaining £50,000: £4,000
- Total: £11,500
Today, the calculation is:
- 5% on the first £125,000: £6,250
- 7% on the next £125,000: £8,750
- 10% on the final £50,000: £5,000
- Total: £20,000
The same purchase now costs £8,500 more in SDLT, an increase of almost 74%. On a property yielding perhaps £15,000 a year in rent, that is a huge upfront extra cost to fund before the first tenant even moves in.
The portfolio purchase: where the damage is greatest
Now take a landlord buying five houses at £200,000 each, so £1m in total, from one seller in a single transaction.
With MDR, before June 2024 and with a 3% surcharge, the average price per dwelling was £200,000. Tax on that average was 3%, or £6,000. Multiplied by five dwellings, the total was £30,000.
Today, with no MDR, the higher rates apply to the full £1,000,000:
- 5% on the first £125,000: £6,250
- 7% on the next £125,000: £8,750
- 10% on the next £675,000: £67,500
- 15% on the final £75,000: £11,250
- Total: £93,750
The SDLT bill has more than tripled!
In practice, this arithmetic now decides deals. Purchases that worked at a 6% gross yield stop working once a five-figure SDLT bill is added and financed. We regularly see landlords renegotiate the price, restructure the purchase or walk away altogether.
Highlighting how SDLT should therefore be modelled at the offer stage, not left to the conveyancer in the final week.
The rule that survives: six or more dwellings
One rule was untouched by the abolition of MDR. Under section 116(7) of the Finance Act 2003, where six or more separate dwellings are bought in a single transaction, the transaction is automatically treated as non-residential for SDLT purposes.
The non-residential SDLT rates are much lower than the residential rates and so making use of this rule can mean huge savings.
Can the sixth property pay for itself?
Suppose a landlord agrees to buy five houses at £400,000 each, £2,000,000 in total, from one seller. As a five-dwelling purchase, the higher residential rates apply:
- 5% on the first £125,000: £6,250
- 7% on the next £125,000: £8,750
- 10% on the next £675,000: £67,500
- 15% on the next £575,000: £86,250
- 17% on the final £500,000: £85,000
- Total: £253,750
But the seller also owns a one-bedroom flat worth £150,000. If the landlord adds it to the same contract, six dwellings are bought for £2,150,000 in a single transaction, and the non-residential rates apply:
- 0% on the first £150,000: £0
- 2% on the next £100,000: £2,000
- 5% on the remaining £1,900,000: £95,000
- Total: £97,000
The SDLT saving here is £156,750, more than the £150,000 price of the flat. In effect, the landlord acquires the sixth property for nothing and is still £6,750 better off.
It’s worth pointing out that for this treatment to apply, certain conditions must be met:
- A single transaction. All six dwellings must be acquired in one transaction, not a series of separate contracts.
- Genuine dwellings. Each property must be a genuine, separate dwelling.
- Commercial sense. The purchase must make commercial sense on its own terms. HMRC looks closely at arrangements where a “dwelling” exists mainly to reach the threshold.
- Company buyers. Companies must check whether any individual property over £500,000 could attract the separate 17% rate for non-natural persons (such a property is taxed separately and does not count towards the six).
The bottom line
SDLT is now one of the largest costs in any property acquisition and can no longer be treated as an afterthought. The right structure, the right number of properties and the right timing can make a difference of tens of thousands of pounds and sometimes decides whether a deal is viable at all.
If you’re considering a purchase, or have questions about how SDLT applies to your portfolio, contact Sam at samantha.stent@scruttonbland.co.uk or call 0330 058 6559.
