SDLT overlap relief when a new lease replaces an old one
SDLT overlap relief in this example
HMRC’s example shows how a replacement lease can use nil rent during an 11-year overlap period where the old lease rent exceeds the new lease rent.
- The old rent was £240,000 a year.
- The new rent was £210,000 a year.
- The calculation used £0 for years 1 to 11.
Scroll down for the full analysis.
Read the original guidance here:
SDLT overlap relief when a new lease replaces an old one
Stamp duty land tax can count less rent when you give up an old lease and take a replacement lease. In HMRC’s example, the old rent was higher than the new rent. As a result, the rent used for the first 11 years of the new lease was nil.
What this rule is about
A replacement lease can overlap with time left on the old lease. Without a special rule, SDLT could count rent for a period that the old lease already covered. Overlap relief aims to prevent that result.
This relief does not erase the new lease. Instead, it reduces the rent used in its SDLT calculation for the overlap period. It can never produce a negative rent figure.
What the official source says
HMRC’s manual gives a detailed example. A 25-year old lease began on 1 April 2004 and would have ended on 31 March 2029. On 1 April 2018, the tenant gave it up and received a new 150-year lease.
- The old lease began with annual rent of £144,000, including VAT.
- Its first rent review took effect on 1 April 2009, after five years.
- Following the 2014 review, the annual rent under the old lease was £240,000.
- The old lease’s net present value, or NPV, was £2,373,337.
- The new lease required annual rent of £210,000, including VAT.
- The new lease had no rent-review clause.
From 1 April 2018 to 31 March 2029, the leases overlapped. That is 11 years. HMRC says the rent then payable under the old lease was £240,000 a year, even though the initial NPV calculation had not used that later reviewed amount.
This is the key point: HMRC treats the £240,000 as relevant because it was the rent due at that time under the old lease’s terms, and the old lease was subject to SDLT.
What this means in practice
For each of the first 11 years, the new rent was £210,000 and the old rent was £240,000. Subtracting the old rent would take the figure below zero. A statutory limit prevents that.
HMRC’s calculation therefore uses nil rent for years 1 to 11. It then uses £210,000 a year for years 12 to 150. Having old rent that exceeds the new rent does not create a credit.
- Start with the rent due under the new lease.
- Identify the period the old lease would still have had left.
- Find the old rent that HMRC says applies in that period.
- Reduce the new rent by that old-rent amount.
- Use nil, rather than a minus figure, if the result falls below zero.
How to analyse it
Ask a simple question first: does the new lease replace the old one over the same, or substantially the same, premises? If it does, the dates and rent clauses become vital.
- Check when the new lease was granted.
- Check when the old lease would have ended without the surrender.
- Measure the overlap period between those dates.
- Read every rent-review term in the old lease.
- Work out the rent due under both leases during overlap.
- Check whether the new lease has variable rent.
Variable rent has its own SDLT rules. In this example, HMRC says those rules did not apply to the new lease because its rent did not vary. That matters because it leaves the overlap calculation to do the work.
Example
Imagine a business tenant gives up a lease with 11 years left and takes a much longer replacement lease on 1 April. At that date, the old lease rent is £240,000 a year. The new lease rent is £210,000 a year and stays fixed.
For years 1 to 11, £210,000 less £240,000 gives a negative number. The calculation uses £0 instead. From year 12 onwards, no old lease period remains, so it uses the full £210,000 annual rent.
HMRC says its SDLT calculator cannot carry out this particular calculation. Its manual says that the figures must therefore be calculated manually.
Why this can be difficult in practice
You might think the old lease’s first SDLT calculation settles every later rent figure. HMRC’s example says otherwise. It uses the rent actually payable under the old lease during the overlap, despite the earlier NPV calculation using a different figure.
Although that distinction sounds narrow, it can materially change the NPV of a long replacement lease.
- A rent review may have changed the old rent before the replacement lease began.
- The old and new premises may not match exactly.
- Lease documents may describe rent, VAT and review dates in different places.
- A new lease with changing rent needs further analysis under the variable-rent rules.
- Standard calculator output may not reflect this fact pattern.
Key takeaways
- Overlap relief can reduce rent used for SDLT on a replacement lease.
- The reduction only applies while the old lease would still have continued.
- Where old rent exceeds new rent, the figure stops at zero.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 Schedule 5 para 3 — calculating the net present value of lease rent
- FA 2003 Schedule 17A para 7 — working out rent where lease rent can vary
- FA 2003 Schedule 17A para 9 — reducing rent where replacement leases overlap
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The manual gives the inputs for the replacement lease calculation but does not state its final net present value or SDLT amount.
- Different lease terms, premises or rent arrangements may change whether overlap relief applies and how it works.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The old lease, including its term and rent-review clauses.
- The surrender documents and the new lease.
- Evidence that the premises under both leases are the same or substantially the same.
- A schedule showing rent due under each lease during the overlap period.
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION SDLT overlap relief when a new lease replaces an old one [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 Schedule 5 para 3 - calculating the net present value of lease rent https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 Schedule 17A para 7 - working out rent where lease rent can vary https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/7/2025-11-17 - FA 2003 Schedule 17A para 9 - reducing rent where replacement leases overlap https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/9/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm16035 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The manual gives the inputs for the replacement lease calculation but does not state its final net present value or SDLT amount. - Different lease terms, premises or rent arrangements may change whether overlap relief applies and how it works. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 1 September 2026
Useful article? You may find it helpful to read the original guidance here: SDLT overlap relief when a new lease replaces an old one
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