Amidst the highest tax burden since the second world war and sky-high mortgage rates, Jeremy Hunt has delivered a Spring Budget described by ministers as “prudent and responsible.”
David Hannah, Group Chairman of Cornerstone Tax, the UK’s leading property tax advisory, discusses what the Budget means for prospective first-time buyers, tenants and landlords.
What is Multiple Dwellings Relief?
Introduced in 2011 to reduce a barrier to investment in residential property and stimulate supply in the private rental sector, Multiple Dwellings Relief works by simply paying Stamp Duty on the average price of every dwelling included in your transaction. This helped buyers save between £10,000 and £87,000 on a house with a single annex depending on its price.
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Whilst investors could always opt to pay the commercial rate of stamp duty at 5%, many could still choose to claim Multiple Dwellings Relief because of the much lower minimum rate of 1%, making volume acquisitions of cheaper apartments or houses even more attractive than 5% of the full price.
Asserting that the Relief was “being regularly abused” and that there was “no strong evidence” to suggest that private rental sector was being supported – MDR was abolished in yesterday’s Spring Budget, provoking fresh criticism amongst senior figures within the UK’s property investment landscape.
David Hannah, Group Chairman of Cornerstone Tax, said, “Multiple Dwellings Relief was first implemented as means to incentivise bulk purchases and provided developers with a suitable avenue for delivering low-cost homes. 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 Mr Hunt 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.”
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