Example 8: Tax Relief for Multiple Dwelling Purchases and Subsequent Lease Grants

Multiple dwellings relief after flats are merged or let on long leases

Multiple dwellings relief for SDLT can be revisited after completion if the number of dwellings effectively changes during the post-completion review period. HMRC’s example shows that granting long leases over some flats does not by itself trigger a recalculation, but physically combining other flats so there are fewer dwellings can reduce the relief and lead to extra SDLT, a further return, and payment within 30 days.

• Multiple dwellings relief usually works by dividing the total price by the number of dwellings, applying SDLT to that average figure, and then charging tax on the full price.
• In HMRC’s example, a block of 8 flats is bought for £1,000,000, so the initial average price is £125,000 per dwelling.
• Granting 99-year leases over 2 flats to unconnected third parties within the relevant period does not, on its own, trigger a recalculation and does not end the review period.
• When the remaining 6 flats are later combined into 3 larger flats, HMRC treats this as a relevant event that requires the original SDLT to be recalculated.
• After the merger, the transaction is treated as if there had been 5 dwellings at the outset: the 3 merged flats plus the 2 flats subject to long leases, increasing the average price to £200,000 per dwelling.
• If the revised calculation produces more SDLT, the buyer must file a further SDLT return and pay the extra tax within 30 days.

Scroll down for the full analysis.

Multiple dwellings relief: what happens if some flats are later combined and others are let on long leases?

This page explains how multiple dwellings relief can change after a purchase if the number of dwellings effectively changes during the post-completion review period. The HMRC example deals with a block of flats bought as eight dwellings, where two flats are later let on long leases and the remaining six are then merged into three larger flats. The key point is that not every later event changes the SDLT position, but some do.

What this rule is about

Multiple dwellings relief applies where a transaction involves more than one dwelling. Broadly, the SDLT rate is worked out by dividing the total consideration by the number of dwellings, then applying that rate to the total price. That can reduce the overall tax compared with taxing the whole price as a single acquisition.

But the position does not always stay fixed at completion. There is a “relevant period” after the purchase during which certain later events can trigger a recalculation. This matters because the relief depends on how many dwellings are treated as acquired. If that number later changes in a way recognised by the rules, the original SDLT may need to be revisited.

What the official source says

HMRC’s example starts with the purchase of the freehold of a block of eight flats for £1,000,000. That is a purchase of more than one dwelling, so it is a relevant transaction for multiple dwellings relief.

On the original purchase, the rate is determined by dividing £1,000,000 by 8, giving £125,000 per dwelling. HMRC states that the 0% band does not apply under the relief in this example. HMRC also says the higher rates for additional dwellings apply, and that the non-resident rates may also apply if a purchaser is not UK resident.

Six months later, the buyer grants 99-year leases of two flats to unconnected third parties. HMRC says this does not require the SDLT to be recalculated, even though it happens within the relevant period. It also does not end that period, because the whole of the interest acquired on the original purchase has not been disposed of.

After another six months, the remaining six flats are physically combined into three flats. HMRC says this is a relevant event for the purposes of paragraph 6, so the tax must be recalculated. The event is treated as having happened immediately before the original purchase.

After that deemed adjustment, the rate is set by dividing the original £1,000,000 by 5 rather than 8. HMRC arrives at 5 dwellings because there are now three combined flats, plus the two flats in respect of which the long leases were granted. That gives £200,000 per dwelling. If the recalculation produces more tax, the purchaser must file a further return and pay the extra tax within 30 days.

What this means in practice

The example shows two practical points.

First, granting long leases out of some of the flats does not automatically disturb the original multiple dwellings relief calculation. Even though those leases are granted within the relevant period, HMRC’s position in this example is that this is not itself a recalculation event.

Second, physically changing the remaining dwellings can be different. If separate flats are knocked together so that there are fewer dwellings than there were at the time of purchase, that can trigger a recalculation of the original SDLT. When that happens, the law treats the change as if it had already existed just before the original transaction. In effect, the buyer loses part of the benefit of the original relief because the transaction is then treated as involving fewer dwellings.

That can increase SDLT significantly. Here, the average price per dwelling rises from £125,000 to £200,000 once the count falls from eight to five. Since the relief works by reference to the average consideration per dwelling, fewer dwellings usually means a higher effective rate.

How to analyse it

If you are looking at a purchase where multiple dwellings relief was claimed, ask the following questions.

• How many dwellings were acquired at completion?
• Was the SDLT calculation based on that number under multiple dwellings relief?
• Has anything happened during the relevant period after completion?
• Is that later event merely a disposal or grant out of part of the property, or is it an event that changes the dwelling count for the purposes of the relief rules?
• If dwellings have been merged, converted or otherwise altered, how many dwellings should now be counted?
• Does the legislation treat that event as occurring immediately before the original purchase, requiring the original tax to be recomputed?
• If the recalculation produces extra tax, has a further return been filed and payment made within the required 30 days?

This example also shows the importance of separating two issues that are easy to blur together:

• whether a later event is a recalculation trigger at all; and
• whether a later disposal brings the relevant period to an end.

In HMRC’s example, the grant of two long leases does neither.

Example

Illustration: a buyer purchases a freehold block containing eight self-contained flats for £1,000,000 and claims multiple dwellings relief. The initial calculation uses 8 dwellings, so the average consideration is £125,000 per dwelling.

Within the review period, the buyer grants 99-year leases over two flats to third parties. On HMRC’s example, that step alone does not change the original SDLT calculation.

Later, the other six flats are reconfigured into three larger flats. HMRC treats that as a relevant event. The transaction is then recalculated as if, immediately before the original purchase, there had been 5 dwellings rather than 8: the three reconfigured flats plus the two flats subject to the long leases. The average consideration becomes £200,000 per dwelling, so the SDLT due on the original purchase increases. The buyer must then file a further return and pay the additional tax within 30 days.

Why this can be difficult in practice

The difficult part is often identifying exactly which later changes matter and how many dwellings should be counted after those changes.

A later grant of leases may look commercially significant, but HMRC’s example shows that it is not necessarily a recalculation event for multiple dwellings relief. By contrast, physical works that reduce the number of dwellings can be highly significant.

There can also be factual questions about when separate units stop being separate dwellings and become one larger dwelling. The example assumes that six flats have clearly become three flats. Real cases may be less straightforward if works are partial, staged, or incomplete.

Another point is timing. HMRC’s example depends on the events happening within the relevant period. If a change happens outside that period, the outcome may differ. The source material here does not set out the full rules on the length of that period, so that question has to be checked against the legislation and wider HMRC guidance.

Finally, the example refers to other SDLT charges that may sit alongside multiple dwellings relief, including the higher rates for additional dwellings and the non-resident rates. So a recalculation of the dwelling count is only one part of the overall SDLT analysis.

Key takeaways

• Buying a block of flats can qualify for multiple dwellings relief because more than one dwelling is acquired.
• A later grant of long leases over some flats does not automatically trigger a recalculation of the original SDLT.
• If flats are later combined so that there are fewer dwellings within the relevant period, the original SDLT may need to be recalculated and extra tax may become due.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example 8: Tax Relief for Multiple Dwelling Purchases and Subsequent Lease Grants

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