HMRC's Stamp Duty Land Tax guidance on leasehold sales explains how SDLT is calculated for assigned and new leases, with worked residential and non-residential examples, and affects people buying or being granted leasehold property.
Key facts
- Who: Buyers of assigned or new leasehold property, and those granting leases
- From: Already in force
- Source: Stamp Duty Land Tax on Leasehold sales, GOV.UK
HMRC's guidance on Stamp Duty Land Tax (SDLT) for leasehold property explains how the tax works. SDLT does not apply to purchases in Scotland from 1 April 2015, where Land and Buildings Transaction Tax is paid. It also does not apply in Wales from 1 April 2018, where Land Transaction Tax (LTT) applies.
Assigned leases. Where an existing lease is sold on, the buyer pays SDLT on the lump sum for the assignment. In most cases the same rates and thresholds apply as for a freehold purchase. A return must be completed if the price is £40,000 or more, even if no SDLT is due.
New leases. SDLT depends on the premium and any rent. Where only a nominal rent such as a peppercorn is payable, tax is calculated on the premium alone. Where the rent is more than nominal, tax may also be due on the net present value (NPV) of the rent, which is its value over the term at present-day prices. Normally rent only attracts SDLT if it is high.
New residential leases. The tax on the premium is worked out as if it were the price of a freehold, ignoring the rent. The guidance gives an example: a £275,000 premium produces SDLT of £3,750 (0% on the first £125,000, 2% on the next £125,000 and 5% on the remaining £25,000). Different rates and thresholds applied to residential leases bought before 1 April 2025.
If the NPV of the rent exceeds the £125,000 residential threshold, 1% is charged on the excess. In the example, an NPV of £260,000 gives £135,000 over the threshold and £1,350 of tax, added to the tax on the premium. If the threshold has already been used, for example with a linked lease, 1% applies to the whole NPV.
Returns. For new leases a return is required even if no SDLT is due, with two exceptions:
- the lease is for 7 years or more, with a premium under £40,000 and annual rent under £1,000; or
- the lease is for under 7 years and no SDLT is due on any part of the premium or rent.
Uncertain rent or term. Where rent is unknown, it is estimated. The NPV is then recalculated when the actual rent is known or after the first five years. If the recalculated NPV is higher, HMRC must be told in writing within 30 days of the review date and the extra tax paid. If it was overestimated, a refund can be claimed in writing. Leases of unknown or indefinite term are counted as fixed one-year terms, growing year by year.
Non-residential leases. The threshold is £150,000, and the guidance gives worked examples for premiums and rent.
What this means for leasehold buyers and sellers
- Check whether you are buying an existing lease or being granted a new one, because the calculation differs.
- Check the date of purchase: residential leases bought before 1 April 2025 were subject to different rates and thresholds.
- Where rent is more than nominal, the NPV of the rent may add to the tax.
- Keep the lease start and end dates, premium and rent details to hand for the HMRC lease transactions calculator.
- If a calculation is unclear, get advice before any deadline passes, or contact HMRC.
Sources
- HMRC, Stamp Duty Land Tax on Leasehold sales, GOV.UK