The Renters’ Rights Act 2025 – SDLT

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This is a deeper dive into the the rules for SDLT (Stamp Duty Land Tax) on tenancies in England, as they currently stand.

The Renters' Rights Act 2025 Act aims to introduce favourable provisions for tenants, but recent news articles have highlighted that the implementation of assured periodic tenancies will mean that for some tenants SDLT will be due on their rent in the coming years. 

These SDLT rules are not new, but awareness of them is low.

Periodic tenancies: what’s changing under the Renters’ Rights Act

The Act will change the default residential tenancy to an Assured Periodic Tenancy (an APT) meaning that leases will continue indefinitely, rather than being limited to fixed terms. 

Importantly, the provisions introduced through the Act will apply to both existing and new tenancies, meaning all existing tenancies will be converted into assured tenancies.

The current law on SDLT 

SDLT is payable on the chargeable consideration for interests in land.  If you buy a house, SDLT is payable on what you pay for the house.  If you rent a property, SDLT is payable on the rent you pay.  The calculation for SDLT on rent is complex but is based on the Net Present Value (NPV) of a lease. 

At present, many residential tenancies in England are not subject to SDLT.  This is because the first £125,000 of the NPV is subject to a 0% SDLT rate.  SDLT only becomes payable at 1% on the portion of the NPV that exceeds £125,000.

Fixed vs periodic leases

Historically, the £125,000 NPV threshold meant that SDLT applied to few residential tenancies. This is because the value of a lease is calculated by reference to the rent payable during the fixed term. 

For example, a one-year lease at £1,000 per calendar month has an approximate NPV of £12,000 – well below the SDLT threshold. Each renewal or new fixed-term tenancy is usually treated as a separate lease, effectively resetting the calculation. (In some cases a renewed tenancy can be treated as linked with the previous tenancy and therefore like an ongoing tenancy.)

The move away from fixed term tenancies and the introduction of periodic terms means that many leases may now fall within the SDLT regime. These tenancies will not be treated as tenancies of fixed terms (that might be linked but otherwise as separate tenancies with a low NPV) and instead a growing tenancy depending on how long it lasts. 

Research suggests that more than 150,000 tenants could become subject to SDLT reporting within three years [1]. This is because the NPV will be recalculated on each annual anniversary of the tenancy; a one-year lease that continues into a second year would effectively be treated as a two-year lease, with its NPV increasing accordingly. 

Increased tenancy lengths 

Recent market analysis indicates that the average monthly rent in the UK now sits at £1,302[2]. Data also indicates that average tenancy lengths have increased by 25% in recent years[3]. 

Under a periodic tenancy structure, this becomes problematic: as more tenancies continue indefinitely, more leases are likely to exceed the current £125,000 threshold, at which point SDLT becomes payable at 1% on the proportion exceeding that limit.

Worked example

Using the figures above, a tenant paying £1,302 per month will exceed the £125,000 NPV during their ninth year in the property. By the end of their ninth year, the NPV would exceed the threshold by £15,616, resulting in an SDLT liability of £156.16. 

If the tenancy continues, a further recalculation must be done each year with any additional SDLT paid at that point (i.e. recalculate the NPV of the increased tenancy, and subtract the SDLT previously paid).

This scenario is likely to affect many tenants, given that average tenancy lengths appear to be increasing[4].  Under the current tenancy laws, most of these tenants would never have incurred SDLT, as each new fixed term would reset the calculation and, unless rent exceeded £10,416.75 per calendar month, the lease value would not surpass the £125,000 threshold. 

(The full calculation for the NPV for a residential lease is even more complex than the above as it includes a discount rate of 3.5%.  For the purposes of this example and article, we have not added that extra step.)

Filing obligations

This change will impose a significant, and presumably unintended, administrative burden on tenants who were previously outside the scope of the SDLT regime. 

Tenants who become subject to SDLT will be required to submit an SDLT return and pay any SDLT due within 14 days of the liability arising. In future years when any recalculation is made, the filing obligation would be 30 days.

Penalties may also be incurred for non-compliance: a £100 penalty applies where a return is filed up to three months late, increasing to £200 where the return is more than three months late. 

Will this be addressed?

These SDLT rules are not new, but the changes in the Act will bring more tenants into the SDLT net.  This is presumed to be unintended but there are no suggestions the government intend to make any changes to address this. 

In response to a query from the tax commentator Dan Neidle, the Ministry of Housing, Communities and Local Government commented: 

If any changes are needed to accommodate the new tenancy system within the SDLT regime, this will be announced at a fiscal event as normal.

(see Lease reform: stamp duty headache for 150,000+ tenants)

How Burges Salmon can help

Burges Salmon has extensive experience advising landowners in relation to SDLT. We can provide clear, practical advice on any SDLT consequences that may arise under the new Renter’s Rights Act and advise on the impact these changes may have on your property portfolios as well as any other issues that arise from the Act.

This article was written by Ella Perrett, Trainee Solicitor in the Tax and Trusts team 

This change will impose a significant, and presumably unintended, administrative burden on tenants who were previously outside the scope of the SDLT regime.