In this section:

- What amount is SDLT charged on?
- SDLT for leasehold purchases
- SDLT when transferring ownership of land or property
- SDLT on a shared ownership property
- SDLT for linked purchases or transfers
- Land or property transactions that qualify for SDLT relief
- Obtaining HMRC advice on how SDLT will apply
- SDLT calculators

When someone buys a leasehold property, the Stamp Duty Land Tax (SDLT) they have to pay depends on whether it's an existing lease or a new one.

If it's an existing lease - an 'assigned lease' - they only have to pay SDLT on the 'premium' (the lump sum paid to buy a new lease) as if they'd bought a freehold property. The same rates, thresholds and conditions for deciding whether to complete an SDLT return apply.

How you calculate SDLT on the grant of a new lease depends on the 'premium', the rent payable under the lease, and whether it's a residential or non-residential lease. Whether you'll need to complete an SDLT return depends on the length of the lease and the amount of the rent and premium.

This guide explains SDLT on leases and tells you where to find more information.

On this page:

- SDLT for assigned leases
- SDLT for new leases - introduction
- Calculating SDLT on new residential leases
- Calculating SDLT on new non-residential leases
- How to calculate the net present value (NPV) of the rent
- NPV if all or part of rent unknown or uncertain
- NPV if term of lease unknown or indefinite
- SDLT and 'abnormal' rent increases
- NPV if lease surrendered and new lease granted on the same property
- New leases - completing the SDLT return

Both residential and non-residential properties can be leasehold or freehold. For example, a developer might build some flats and sell them on 99 year leases. If someone who bought one of the 99 year leases, sold it when it still had 88 years to run, they would assign the lease to the new owner for the remainder of the period.

This new owner normally pays a lump sum for the assignment of the lease and they pay SDLT on this sum. In most cases they calculate the amount of the tax using the same rates and thresholds as they would if they'd bought a residential or non-residential freehold property. To check the current and earlier year rates for this type of property follow the link below.

Find out about SDLT rates and thresholds

The rules for when a buyer must complete an SDLT return for an assigned lease are the same as for a purchase of freehold property. The buyer must complete a return if the purchase price is £40,000 or more - even if no SDLT has to be paid.

If someone buys a new lease, the SDLT they have to pay depends on two things:

- the amount of the premium
- the amount of any rent due

If someone buys a new lease and they pay a premium and only a nominal rent (for example, a peppercorn), you only calculate SDLT on the amount of the premium. This applies whether it's a residential or non-residential lease.

You calculate the SDLT on the premium in the same way as you would if it was the purchase price of a freehold property. And you have to complete an SDLT return if the purchase price is £40,000 or more - even if no SDLT is payable.

Find out about SDLT rates and thresholds

If someone buys a new lease and they pay a premium and more than a nominal rent, you have to work out separately the SDLT on:

- the premium
- the value of the rent payable over the term of the lease at present day prices - called the 'net present value' (explained further below)

It depends on the length of the lease, but you'll normally only have to pay SDLT on the rent if it's fairly high - for example about £4,500 a year for a 99 year lease.

The rules for working out the SDLT are different for residential and non-residential new leases and are explained in the sections below.

Residential property is:

- a building used or suitable to be used as a private dwelling, including ones that are being built or adapted to be used as a private dwelling
- land that's the garden or grounds of a private dwelling, including a right or interest in that land, up to a limit of (usually) half a hectare

If **six or more** separate properties are bought in a single
transaction, , it's treated as non-residential.

Follow the link below for more information on 'SDLT rates for non-residential
or mixed use properties'.

SDLT rates for non-residential or mixed use properties

To calculate the SDLT when someone buys a new residential lease, you have to work out the amounts due on the premium and on the rent separately. Then you add the two amounts together to calculate the total amount due.

You work out the SDLT on the premium in the same way as if it was the purchase price of a freehold property. You don't take into account the level of the rent due under the lease.

For example, if someone paid a premium of £200,000 on a new residential lease, they would have to pay SDLT at the rate of 1 per cent. So the amount due would be £2,000.

Read about SDLT on shared ownership property

If the net present value of the rent is more than the residential property SDLT threshold of £125,000 the buyer has to pay SDLT on the rent as well as on the premium. However, note that in this case you calculate the tax at a flat rate of 1 per cent on the amount of the net present value that exceeds the SDLT threshold.

For example, if the net present value of the rent under a lease is £180,000 then the amount of the net present value that's over the £125,000 threshold is £55,000. SDLT has to be paid on this £55,000 at the rate of 1 per cent. This is added to the amount of SDLT that's due on the premium.

You can use the HM Revenue & Customs (HMRC) online calculator to work out the net present value. Read the later section 'How to calculate the net present value of the rent' to find out more.

The amount of SDLT due when someone buys a new non-residential lease depends on the amounts of the premium and rent they pay under the lease.

If the annual rent for the lease (not the net present value) is less than £1,000, the buyer pays SDLT on the premium at the same rate as they would pay on the purchase price of a freehold non-residential property. So they will only have to pay SDLT if the premium is more than the threshold.

If the annual rent is £1,000 or more, the buyer has to pay SDLT on the whole of the premium. The zero rate of SDLT doesn't apply, even if the premium is within the £150,000 non-residential threshold. You use the 1 per cent rate to work out the tax on a premium up to £250,000 and the higher rates if it's more than this.

For example, if someone paid a premium of £130,000 and an annual rent of £1,500, they would have to pay SDLT at the rate of 1 per cent on the whole of the premium. The tax due would be £1,300.

Find out the rates and thresholds for SDLT

If the net present value of the rent is more than the non-residential SDLT threshold, the buyer has to pay SDLT on the rent as well as on the premium. You calculate the tax at a flat rate of 1 per cent on the amount of the net present value over the threshold. The SDLT threshold for non-residential property is £150,000.

For example, if the net present value of the rent for a non-residential lease is £200,000, the amount of the net present value over the threshold is £50,000. SDLT therefore has to be paid on £50,000 at the rate of 1 per cent – that is, £500. This is added to the amount that has to be paid on the premium.

You can use HMRC's online SDLT lease transactions calculator below to work out the net present value and the amount of any SDLT due on it. (Select 'residential' or 'non-residential' as appropriate for the property type.)

If the term of the lease is longer than five years, the calculator will work out the amount of SDLT due by taking the highest rent payable in the first five years and then applying that amount to each remaining year of the term.

You should include any VAT payable on the rent in the NPV calculation using the following rates:

- 1 January 2010 to 3 January 2011 inclusive: 17.5%
- 4 January 2011 onwards: 20%

Use HMRC's SDLT lease transactions calculator

See the sections below for what you'll need to do to work out the net present value if any of the following applies:

- all or part of the rent is unknown
- the length of the lease is unknown or indefinite
- the rent doubles or more than doubles after five years
- the lease is surrendered and a new lease is granted on the same property

When someone buys a lease, they may not know exactly how much the rent is going to be each year. For example, this could be because the amount depends on how well their business does.

In this case, when you work out the net present value of the rent, you'll have to make a reasonable estimate of what the rent will be so you can calculate the SDLT due. You'll then have to recalculate the net present value when the first one of the following occurs:

- you finally know the actual amount of the rent
- the first five years have passed

If your recalculation shows that the net present value is more than the amount you used to complete the original SDLT return, you'll have to notify HMRC and pay any extra tax due.

You must write to the Birmingham Stamp Office within 30 days of the review date telling them the revised figure for the net present value and enclosing any extra payment due. You'll have to do this in writing even if you made the original notification online.

If your recalculation shows that you overestimated the net present value and paid too much SDLT, you can write to claim a refund.

Get contact details for the Birmingham Stamp Office

Find out about amending an SDLT return after the filing date

If you don't know the term of the lease, or if it's not definite, you treat it as if it's a lease for a fixed term of one year to calculate the net present value. If it carries on after the end of the first year, you treat it as if it's a lease for a fixed term of two years - and so on for as long as it continues. This is called a 'growing lease'.

If the lease is a growing lease, you'll only have to complete an SDLT return if either of the following apply:

- SDLT is due when the lease is granted
- SDLT becomes due as the lease continues

If a tenancy carries on from one period to the next unless either party gives notice to terminate it, it's called a 'periodic tenancy'. This is the most common example of an indefinite lease.

Read more about indefinite and periodic leases

The owner of a lease must review every rent increase after the fifth year of the lease. Broadly speaking, if the rent has doubled, or more than doubled, since the fifth year it will be treated as an 'abnormal' rent increase and the lease owner must make a further SDLT return and pay any tax, or extra tax, that's due. This is the case even if the increase is under the terms of the lease, or a variation of it.

The only exception to this is where the original lease is a 'Stamp Duty lease' - a lease that was granted before SDLT was introduced on 1 December 2003. In this case, the lease owner doesn't have to pay any SDLT.

You can use the HMRC calculator below to help you work out whether your rent increase is abnormal and, if it is, how much SDLT is payable, if any.

You must write to the Birmingham Stamp Office within 30 days of the review date telling them the revised amount and enclosing any extra payment due. You'll have to do this in writing even if you made the original notification online.

(If you later find that you overestimated the rent and paid too much SDLT, you can write to claim a refund.)

Get contact details for the Birmingham Stamp Office

Find out about amending an SDLT return after the filing date

Use the abnormal rent increase calculator

There are special rules for when a lease is surrendered early and a new lease is granted by the same landlord to the same tenant for the same (or substantially the same) property.

If the rent for the new lease is higher than the rent for the old one, you calculate the net present value for period covering the start of the new lease up to the date when the old lease was due to end using the amount of rent increase only. For example, if the monthly rent increases by £200 at the start of the new lease and the old lease is due to end 12 months later, the amount of rent taken into account for this period is £2,400. You then take into account the full rent due for the remaining term of the new lease.

You can't use the online calculator to work this out so you'll have to do it manually. If you have problems making the calculation you can contact the Birmingham Stamp Office.

If the original lease was a 'Stamp Duty lease' - a lease that was granted before SDLT was introduced on 1 December 2003 - the whole of the rent for the term of the new lease is used to calculate the net present value.

Contact the Birmingham Stamp Office for help with your calculation

You'll need to complete an SDLT return even if there's no SDLT due unless either of the following applies:

- the lease is for seven years or more, the premium is less than £40,000 and the annual rent is less than £1,000
- the lease is for less than seven years and you don't have to pay SDLT on any part of the premium or rent

The easiest way to complete an SDLT return and calculate and pay any tax due is online.

Read about how to complete a SDLT return