Guide to Extending Lease Terms: Reversionary Leases, Surrender and Regrant

SDLT on Extending a Lease

Extending a lease does not always count as a simple change to the existing lease for Stamp Duty Land Tax purposes. If the law treats the extension as a new lease, usually through a surrender and regrant, a fresh SDLT calculation and filing may be needed.

• SDLT depends on the legal effect of the lease extension, not just what the parties call it.
• A lease extension may happen by a reversionary lease, an express surrender and regrant, or a deed of variation that amounts in law to an implied surrender and regrant.
• If there is a surrender and regrant, SDLT is generally worked out on the net present value of the regranted lease, not just on the extra years added.
• Where rent under the new lease overlaps with a period already taxed under the old lease, the rent already taken into account can reduce the new SDLT rent calculation for that overlap period.
• You should also check whether there is any other chargeable consideration besides rent, and separate HMRC guidance may be needed for reversionary leases.

Scroll down for the full analysis.

SDLT when a lease term is extended

This page explains what happens for Stamp Duty Land Tax when the term of an existing lease is extended. The key point is that extending a lease is not always treated as a simple amendment to the old lease. In some cases, SDLT treats the transaction as involving a new lease, which can create a fresh SDLT charge.

What this rule is about

A lease can be extended in different legal ways. That matters because SDLT follows the legal effect of what has been done, not just the commercial intention. If the extension is treated as a new lease being granted, SDLT may be due on that new lease.

The HMRC material identifies three main ways the term of a lease may be extended in practice:

• by granting a reversionary lease, where the new term starts in the future rather than immediately
• by an express surrender of the existing lease followed by a regrant
• by a deed of variation extending the term, where the law treats the change as an implied surrender and regrant

The SDLT result depends on which of these routes applies.

What the official source says

The source says that where the lease term is extended by an express surrender and regrant, or by a deed of variation that takes effect as an implied surrender and regrant, SDLT is payable on the net present value of the regranted lease.

It also says that, for the rent element, there is a reduction for any overlap period. In other words, if part of the rent under the regranted lease covers a period that has already been brought into account for SDLT on the old lease, that earlier rent is taken into account so that the same period is not fully charged again.

For reversionary leases, the source points to separate HMRC guidance. It does not set out the detailed SDLT treatment for those leases on this page.

The source also cross-refers to HMRC guidance on chargeable consideration for surrender and regrant. That matters because the SDLT analysis may involve more than just rent.

What this means in practice

If the parties extend a lease in a way that amounts to a surrender and regrant, SDLT is not worked out only on the extra years added. Instead, the tax analysis starts from the regranted lease as a new lease transaction.

That means the rent under the regranted lease is relevant to the net present value calculation. However, where the new lease overlaps with a period that was already taxed under the old lease, the rent for that overlap period is reduced by the amount already taken into account for SDLT purposes.

This is an anti-duplication adjustment. It does not mean the whole transaction is ignored for SDLT. It means that, for the rent element, HMRC accepts that rent already taxed on the earlier lease should not simply be counted again for the same period.

The practical consequence is that a lease extension can trigger a fresh SDLT filing and calculation even where the parties think they are only lengthening the existing term.

How to analyse it

A sensible way to analyse a lease extension is to ask the following questions.

• What exactly has been done legally: a reversionary lease, an express surrender and regrant, or a variation that operates as an implied surrender and regrant?
• If there is a surrender and regrant, what are the terms of the regranted lease, including the rent and the new term?
• Is there an overlap period between the old lease and the regranted lease for which rent has already been taken into account for SDLT?
• What rent relating to that overlap period was already included in an earlier SDLT calculation?
• Is there any other chargeable consideration arising on the surrender and regrant, not just rent?

The legal characterisation is the starting point. A document described as a deed of variation may still be treated in law as a surrender and regrant. If that happens, the SDLT analysis follows that legal effect.

Example

Illustration: a tenant has an existing lease with rent that has already been taken into account for SDLT. The parties later sign a deed extending the term. If that deed takes effect in law as an implied surrender of the old lease and the grant of a new lease, SDLT is calculated on the regranted lease. But if part of the rent under the regranted lease relates to a period already covered by the old lease and already brought into account for SDLT, that overlap rent is reduced accordingly in the new calculation.

The important point is that the transaction is not ignored just because the parties call it an extension. The SDLT treatment follows whether there has been a regrant.

Why this can be difficult in practice

The main difficulty is that lease extensions are often documented as variations, but the SDLT result depends on the legal effect of the change. In land law, some variations are treated as so significant that they amount to a surrender of the old lease and the grant of a new one. Extending the term can fall into that category.

A second difficulty is calculation. The source says the rent element for the overlap period is reduced by rent already taken into account for SDLT purposes. That requires a clear understanding of what was previously taxed and for what period. If the earlier SDLT position is unclear, the overlap adjustment may be difficult to apply accurately.

A third issue is that the source only gives a short summary. It points elsewhere for the treatment of reversionary leases and for what counts as chargeable consideration on surrender and regrant. So a complete SDLT analysis may require looking beyond this page.

Key takeaways

• Extending a lease can create a fresh SDLT charge if the arrangement amounts to a surrender and regrant.
• Where there is a regranted lease, SDLT is charged on its net present value, with a reduction for rent in any overlap period already taxed.
• The label on the document is not enough; the legal effect of the transaction determines the SDLT treatment.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide to Extending Lease Terms: Reversionary Leases, Surrender and Regrant

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