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Find out when multiple dwellings relief (MDR) for Land Transaction Tax (LTT) applies when you buy property in Wales.

Organisation:
First published:
14 June 2021
Last updated:

When you buy a property in Wales which is made up of more than one dwelling, in the same transaction (or linked transactions), you’ll be able to claim MDR.

Examples of this include:

  • houses with an annexe
  • a house with a cottage in its grounds
  • 2 neighbouring houses

When you can claim the relief

Every dwelling included in the claim for MDR must meet the test of being a standalone dwelling.

Each dwelling should have its own:

  • kitchen area (somewhere to store, prepare and cook food, and to wash up)
  • bathroom (toilet, sink, and bath or shower)
  • space to live and sleep
  • independent access

Each dwelling should be private and secure. That means you should not be able to move freely from one dwelling to the other, for example, through a common hallway.

If there are interconnecting doors between the dwellings, they should be lockable on the date you buy the property.

Because you’ll be buying more than one dwelling, you’ll need to consider whether you have to pay the higher rates of LTT.

How to claim the relief

You claim MDR on your tax return.

If you did not claim it, and later realise you should’ve, you can amend your return and claim a refund of extra tax paid. You can only amend your return to claim MDR within 12 months of the filing date on your original return.

How to calculate tax with the relief

MDR is a partial relief. This means that where it’s claimed, there’ll always be some LTT owed.

To work out the amount of LTT payable with a claim for MDR, follow these 3 steps:

  1. Take the total purchase price for all the dwellings and divide it by the number of dwellings you’ve bought.
  2. Take the figure from step 1 and calculate the LTT due based on this amount. You can use our tax calculator to help you work this out.
  3. Take the figure from step 2 and multiply it by the number of dwellings used in step 1. This gives you the total amount of LTT payable.

If your transaction includes non-residential land or later linked transactions, contact us for guidance instead.

Example

Mr A buys 2 neighbouring dwellings for £400,000 on the same day from the same seller. The higher rates of LTT apply to this transaction.

The amount of LTT he owes applying MDR would calculate as follows:

  • 400,000 / 2 = £200,000
  • £200,000 at the higher rates of LTT = £8,700
  • £8,700 x 2 = £17,400
  • total LTT = £17,400

Minimum tax rule

Where you claim MDR you must pay at least 1% of the purchase price of the property in LTT.

This means if you follow the above 3 steps to calculate and get a figure of less than 1% of the property’s purchase price, you’ll need to uplift the amount on your return to 1% of the purchase price.

Example

Ms C buys 2 dwellings in one transaction. The purchase price was £270,000. The dwellings have individual values of £190,000 and £80,000. The conditions for subsidiary dwelling exception in the higher rates residential property transactions rules are met. So higher rates will not apply to the transaction.

Using the above steps to calculate, the LTT liability would equal £0. But the minimum tax rule will apply in this case as the LTT on the consideration given is less than 1% of that amount of consideration.

The minimum tax rule therefore means that the tax to be self-assessed is £2,700 (£270,000 x 1%).

When the relief does not apply

In certain cases, MDR cannot be claimed where some other reliefs can be claimed, even if you decide not to claim for them or withdraw.

MDR is not available for transactions where these reliefs are being claimed:

  • group relief
  • reconstruction and acquisition relief
  • charities relief
  • persons exercising collective rights

The relief is not available for some transactions involving leasehold interests.

More information

For a more detailed explanation, or if you’re uncertain how the relief applies: