HMRC has published manual guidance on Stamp Duty Land Tax (SDLT) where a lease is varied to raise the rent within five years, affecting landlords, tenants and their advisers.
Key facts
- Who: Landlords and tenants who agree to increase the rent under a lease by a deed of variation in the first five years of the lease
- From: 6 July 2026
- Source: SDLTM15010 – Variation of leases: increasing rent in the first five years
HMRC's Stamp Duty Land Tax Manual now explains how SDLT applies when a lease is varied to increase the rent in its first five years. The guidance covers variations made outside the terms of the lease, so that the increase is not counted in the net present value (NPV) calculation for the original lease.
In that situation, the variation is treated as the grant of a new lease, in return for the additional rent payable (Finance Act 2003, Schedule 17A, paragraph 13). This deemed new lease may be linked to the grant of the actual lease.
The effective date of the deemed grant is the date of the deed of variation. If the deed is signed within the first five years but the rent increase only takes effect after those five years end, paragraph 13 does not apply.
Which returns are needed
The returns HMRC expects depend on whether the two grants are linked and whether the original lease grant was notifiable.
- Not linked: The deemed grant must be notified unless an exception applies. An SDLT1 is due within 14 days of the effective date. It reflects the term remaining on the actual lease from the date of the increase, and the chargeable consideration is the additional rent only.
- Linked, original grant notifiable: An SDLT1 is due within 14 days on the same basis. Tax on the NPV of the additional rent is worked out under the linked-transaction rules. A further return may be needed within 30 days if extra tax is due on the original grant.
- Linked, original grant not notifiable: The increase may make the original grant notifiable. If so, two separate SDLT1s are required, one for each grant, both within 14 days of the effective date of the deemed grant.
When paragraph 13 does not apply
For variations on or after 19 July 2006, paragraph 13 applies only if the variation takes place before the end of the fifth year. A lease that was subject to stamp duty rather than SDLT when granted will therefore never face an SDLT charge if it is varied only to raise the rent after year five.
A rent increase that results only from a landlord's election to waive exemption from VAT, merely adding VAT to the existing rent, is not treated as a variation to increase rent. Statutory rent reviews under agricultural tenancy legislation are also not variations of the lease.
What this means for landlords and tenants
A change to the rent in a lease's early years can create its own SDLT reporting duty, and in some cases can make an earlier lease grant reportable. The deadlines are short: 14 days from the effective date of the deemed grant in the cases above, and in some cases 30 days for a further return.
Before agreeing or signing a deed of variation that raises rent, check the lease date, when the increase takes effect and whether the original grant was reported. Get advice before a deadline passes.
Sources
- HMRC, SDLTM15010 – Variation of leases: increasing rent in the first five years, Stamp Duty Land Tax Manual