The ‘six or more’ rule – How portfolio investors can qualify for non-residential SDLT

Ever since the discontinuation of the Multiple Dwellings Relief in June 2024, property and portfolio investors in the UK have been seeking alternative ways to save on the high rates of residential stamp duty land tax (SDLT). The ‘six or more’ dwellings rule helps qualify for non-residential SDLT.

Residential SDLT rates in the UK apply to the purchase of all homes, with buyers paying a tax to HMRC that varies based on the property’s value and whether it is the buyer’s primary or secondary home. To support property investment, which plays an important role in maintaining a steady supply of rental stock, the government had previously introduced a relief measure for the purchase of more than two dwellings, known as the Multiple Dwellings Relief (MDR).

However, after careful review of MDR, it was realised that the relief hadn’t had much impact on property investments and that the government was only losing revenue. To cut its losses, MDR was suspended, leaving investors with the ‘six or more’ rule, under which they must purchase six or more dwellings in a single transaction to take advantage of lower non-residential SDLT rates. This rule applies to individual and overseas investors as well as corporates buying properties in the UK.

Read more about SDLT and the other often overlooked costs of buying a London property.

What is the SDLT ‘six or more’ rule?

According to Section 116(7) of the Finance Act 2003, which is also referred to as the six-or-more-dwellings rule, buying six or more dwellings in a single transaction is treated as a non-residential purchase for SDLT purposes.

What does this actually mean?

This means that investors making such a bulk property investment can pay a lower non-residential SDLT rate rather than the significantly higher residential SDLT rate. Since HMRC views such transactions as having a commercial rationale, they are taxed differently from conventional single- or additional-home purchases.

Why does this rule matter more after June 2024?

Before being revoked in June 2024, MDR was a widely used discount applicable to purchasers of blocks of flats or properties. SDLT was calculated not on the consolidated transaction value but on the average price per dwelling. While this allowed investors to save SDLT on higher-value properties by averaging them with lower-valued homes, it also created loopholes. Especially, when buying larger properties with annexes or granny flats, as they could be classified as individual dwellings for MDR purposes.

With MDR gone, investors began looking for other ways to optimise their tax bills, and the six-or-more rule for qualifying for non-residential discounts has become a legitimate strategy for portfolio investors.

Residential vs non-residential SDLT rates

As per current SDLT rates (as of April 2025), residential rates can go up to 12% for standard purchases and up to 17% for second or additional homes. Also, for non-resident buyers, there is an additional 2% surcharge on top of the existing rate.

Read more on how SDLT rates have changed since April 2025.

Example – Portfolio purchase of £3 million

Let’s take an example of a portfolio investor buying six flats in London, each valued at £500,000, for a total purchase value of £3 million.

SDLT rates on this purchase could be applied in three different ways:

Scenario 1: Buying six dwellings individually (Additional Dwelling Rate)

In this scenario, the total SDLT on each dwelling would work up to £40,000. This means for six dwellings the total SDLT is £240,000, with an effective rate of 8%

Scenario 2: Buying six dwellings as one transaction (Additional Dwelling Rate)

Since clubbing all the dwellings into a single transaction takes the total taxable value into the higher tax brackets of 15% and 17%, the total SDLT payable on such a transaction would take the tax bill to £423,750. This is the highest SDLT payable with an effective rate of 14.1%

Scenario 3: Applying the six or more rule for non-residential SDLT

By applying for the lower non-residential tax rates on the purchase of six dwellings, an investor could bring down the total tax liability to just £139,500, with an effective rate of 4.65%.

These examples clearly show how the correct structuring and application of the non-residential rate could reduce an investor’s tax bill by almost 42% compared with individual purchases and by 73% compared with a single transaction under the higher residential rates for additional dwellings.

Benefit for international investors

Since April 2021, international property investors have also needed to pay a 2% surcharge on their applicable SDLT rate for residential purchases. By buying six or more dwellings and qualifying for the non-residential discount, you can save even that extra 2%, as there is no surcharge on such transactions. As a result, the ‘six or more’ rule is also beneficial for overseas portfolio investors.

What counts as a ‘dwelling’ in the UK?

As per HMRC’s SDLT manual, a dwelling is defined as self-contained accommodation in which each household or tenant has access to basic facilities, such as a space to sleep, cook, and wash. These facilities cannot be shared with any other household or tenant.

What is included in the definition of a dwelling?

• Houses and flats
• Apartments within a block or development
• Self-contained student accommodation
• Off-plan properties that are yet to be completed

Make sure the purchase is in a single transaction (contract)

This is where most investors can get it wrong if the rule isn’t understood clearly.

Single transaction

A single transaction is one in which multiple units are purchased under the same contract, with the transaction date the same for all units.

Linked transactions

Linked transactions may include multiple units purchased as part of a single scheme or arrangement between the same vendor and buyer, but the contracts for each unit are separate, and the transaction dates can also vary.

What’s the challenge here?

While it may be difficult to buy multiple units from different vendors to coordinate the purchases into a single transaction, the ‘six or more’ rule is easily achievable when structuring deals with the same developer or seller. For example, buying multiple units in the same apartment block from one developer is more convenient.

Note: Despite seeming straightforward, such transactions can involve different complex tax considerations and consulting with an expert SDLT professional is recommended.

Date of transaction for off-plan or staged completions

Along with single transactions for completed dwellings, the ‘six or more’ also applies to off-plan purchases where the property is still in a development phase and not yet completed. This shows that only the date of the transaction is of utmost importance, not the stage of development.

Common pitfalls to avoid

Investors should be careful of these common mistakes when planning to apply for the ‘six or more’ rule.

• Buying fewer than six properties and applying for non-residential reclassification.
• Structuring deals as linked rather than single transactions.
• Assuming the rule applies automatically to off-plan purchases without confirming the effective date.
• Delaying professional tax advice until after the exchange.

Transactions based on substantial performance

SDLT on property transactions is payable upon substantial performance. This can mean different things.

• A significant amount of the total transaction value has been paid.
• The buyer has already taken possession of the land or dwelling.
• Rent is being paid on the asset.

How to claim the non-residential rate under the ‘six or more’ rule?

As per the rules, if you’ve purchased six or more properties in a single transaction, you are eligible for the lower rate of non-residential SDLT. However, claiming this relief requires the buyer to follow a few simple steps.

• SDLT returns must be submitted, and the tax due must be paid within 14 days of the transaction date.
• Your solicitor must be aware of the transaction and apply for the non-residential rate.
• Confirm your eligibility under Section 116(7) and apply for this relief, as there is no automatic qualification.

A smart and legitimate strategy for portfolio investors

Since the removal of MDR, the ‘six or more’ dwellings rule has become an important strategy for portfolio investors seeking to benefit from strong rental demand and capital growth potential while avoiding the high SDLT rates on residential purchases. By applying for non-residential SDLT rates on bulk purchases in a single transaction, investors can save substantially when expanding their portfolios in London or anywhere in the UK.

For overseas investors, this rule can be particularly beneficial, as it also removes the non-resident surcharge that would otherwise increase their tax bill.

The only requirement here is to plan and structure your investment correctly by following the terms of this rule, which can get technical and may require expert support.

Invest with Benham and Reeves

As a leading estate and lettings agent with a London-wide network of branches and several overseas offices, Benham and Reeves takes a proactive approach to help property buyers and investors from around the world with all their property needs in the UK capital. If you are planning to diversify or expand your property portfolio and are looking for more such insights on how to optimise your tax bill or any other aspect of your investment, get in touch with our property experts today.