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Chancellor’s abolition of Multiple Dwellings Relief to have ‘seismic’ effect on developers

The government’s move to abolish Multiple Dwellings Relief has been branded a “stealth tax” that could hamper developments, according to David Hannah, group chairman of Cornerstone Tax.

The change means those buying multiple dwellings in a single transaction, such as houses with flats or mixed-use properties, are liable to pay higher stamp duty costs on the combined value, rather than paying stamp duty on the average property value.

The government said some buyers were using it as a loophole by splitting one property into two.

But Hannah said: “At a time when demand for affordable housing has skyrocketed, the government should look to create fresh incentives for developers, instead of abolishing old ones.

“The decision by the Chancellor to increase the tax that developers are forced to pay from 1-2% to 5% will have a seismic shift across Britain’s construction sector, leading to project abandonment and further increases to asking prices as supply continues to lag behind an overwhelming demand for affordable housing. Don’t be fooled, this is a stealth tax increase with a paper-thin justification laced over the top of it.

“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.”

Multiple Dwellings Relief was introduced in 2011, but was axed in the Spring Budget in March 2024.

The change came into effect at the beginning of June.