The Welsh Government has laid draft regulations to amend the Land Transaction Tax (LTT) rules surrounding the combined use of Multiple Dwellings Relief (MDR) and the Subsidiary Dwelling Exception (SDE). 

House with outbuildings

In a 2024 consultation, the Welsh Government explored proposals to change the Land Transaction Tax (LTT) rules, including:

  • The abolition of Multiple Dwellings Relief (MDR).
  • Wider reforms such as the abolition of the LTT relief provided on the purchase of six or more dwellings in a single transaction.

Responses were published in July 2024 with no changes being announced at that time. The Welsh Government indicated it would continue to investigate its options. 

The Subsidiary Dwelling Exception

Under the current LTT rules, the Subsidiary Dwelling Exception (SDE) applies to certain multiple-dwelling transactions, where the dwellings purchased together include a main dwelling and one or more subsidiary dwellings.

An example might be the purchase of a home with a habitable annexe.

  • Where the SDE applies, the transaction is subject to the Main residential rates of LTT whereas, without the SDE, the transaction would be subject to the higher residential rates.

At present, where the SDE applies to a transaction, MDR may also be available.

  • MDR, by calculating LTT according to a prescribed formula, provides further relief from LTT.

Proposed change

In December 2024, in the 2025-26 Welsh Budget, it was announced that regulations would be laid in 2025 to remove the ability to make an MDR claim where the SDE applied, meaning that taxpayers subject to the SDE would pay the main residential rates on the total consideration, without the benefit of MDR. 

New regulations

The draft Land Transaction Tax (Modification of Relief for Acquisitions Involving Multiple Dwellings) (Wales) Regulations 2025 were laid before the Senedd on 14 January 2025.

  • The regulations are expected to apply to all land transactions with an effective date on or after 7 February 2025 and will ensure that for multiple-dwelling transactions subject to the LTT main residential rates due to the application of the SDE, an MDR claim will not be allowed. 

A transitional rule will exclude the regulations from applying to certain land transactions, where they are effected in pursuance of a contract entered into before 7 February 2025.

The changes proposed are estimated to increase LTT revenues by between £1 million and £2 million per year.

Wider update

The Welsh Government has indicated that further work will be carried out to consider MDR within the LTT regime over the coming year, reflecting on the benefits of MDR as a policy lever alongside its impact on LTT revenues. 

Useful guides on this topic

Welsh Land Transaction Tax (LTT)
What is Land Transaction Tax? How does it operate? What reliefs are available?

Welsh LTT Rates
What are Welsh Land Transaction Tax (LTT) Rates? How do you calculate Welsh Land Transaction Tax?

Welsh LTT vs SDLT: Comparing the rates and additional dwellings charge
How does Welsh Land Transaction Tax (LTT) compare to Stamp Duty Land Tax (SDLT)? What are the key similarities and differences?

External links

Written Statement: Land Transaction Tax Multiple-Dwellings Relief

Written Statement: Draft Budget 2025-26: Welsh Taxes

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