Stamp Duty Land Tax: Abnormal Rent Increases and Scottish Tax Changes

SDLT and abnormal rent increases on leases

When working out SDLT on a lease, you cannot always rely on the rent figures in the lease at face value. If the rent rises in an unusual, delayed or artificial way, special SDLT rules may apply, so the rent pattern should be reviewed carefully and checked against the legislation and fuller HMRC guidance.

• SDLT on leases is partly based on the rent payable over the lease term.
• If rent increases are abnormal, the normal SDLT rent calculation may be changed.
• This issue often arises where rent starts low and then jumps sharply later, or where the pattern does not look commercially normal.
• Not every stepped or increasing rent is abnormal; ordinary commercial rent reviews may still be treated normally.
• The key practical step is to review the full rent schedule, consider whether any increases look artificial, and check the underlying law before submitting the SDLT return.
• For Scottish land transactions from April 2015, SDLT does not apply and LBTT is the relevant tax instead.

Scroll down for the full analysis.

SDLT and abnormal rent increases on leases

This page concerns a specific SDLT rule for leases: how to deal with rent that rises in an unusual or artificial way. The point matters because SDLT on leases is based in part on the rent payable over the term. If rent jumps sharply at particular points, the tax treatment may not follow the rent pattern at face value.

What this rule is about

SDLT on a lease can be charged by reference to the rent payable. In straightforward cases, that means looking at the rent due over the lease term and applying the SDLT rules to that rent.

But some leases contain rent patterns that are not commercially normal. A lease might start with a low rent and then rise steeply later, or include unusual step-ups. Rules on abnormal rent increases are aimed at preventing the SDLT result being distorted by that kind of rent structure.

The source material here is an HMRC manual heading referring to “abnormal rent increases”. A manual is not the legislation itself, but it indicates the issue HMRC is addressing when applying the SDLT lease-rent rules.

What the official source says

The supplied source is only the page title and does not set out the operative text. What can safely be taken from it is that HMRC treats “abnormal rent increases” as a distinct issue within the calculation of SDLT on rent for leases.

That tells the reader two things:

• the normal rent calculation rules may be modified where rent increases are abnormal; and
• whether an increase is “abnormal” is likely to be a threshold question in the analysis.

The archived note also states that from April 2015 SDLT no longer applies to land transactions in Scotland. For Scottish transactions from that point, the equivalent tax is LBTT rather than SDLT.

What this means in practice

If a lease contains an unusual rent profile, you should not assume that SDLT is calculated simply by taking each rent figure exactly as it appears in the lease and feeding it into the usual lease-rent computation.

Instead, you need to consider whether the increases are of a kind that the SDLT rules treat as abnormal. If they are, special treatment may apply.

This matters most where:

• the lease has low initial rent followed by large increases;
• the increases do not look like ordinary commercial rent reviews;
• the pattern appears designed to defer rent artificially; or
• the lease structure would otherwise reduce SDLT compared with a more normal rent pattern.

For conveyancers and taxpayers, the practical message is that the rent schedule in the lease needs to be reviewed carefully. A stepped rent is not automatically problematic, but an unusual one may need separate analysis.

How to analyse it

A sensible way to approach the issue is:

• Identify the rent pattern over the full term of the lease.
• Check when and by how much the rent increases.
• Ask whether the increases appear commercially ordinary or unusually large, delayed, or artificial.
• Distinguish ordinary review mechanisms from rent arrangements that may engage the abnormal increase rules.
• Confirm which tax applies. For Scottish land transactions from April 2015, SDLT is not the relevant tax.
• Check the underlying legislation and any fuller HMRC material before finalising the SDLT return, because the supplied source text does not contain the operative detail.

In other words, the key question is not just “what rent is payable?” but also “does the structure of the rent trigger special SDLT treatment?”

Example

Illustration: a tenant takes a long lease at a very low rent for the first few years, followed by a sharp increase to a much higher figure. If that increase is outside what would normally be expected in a commercial lease, the SDLT calculation may need to consider the abnormal rent increase rules rather than relying only on the literal rent timetable.

The supplied source does not give the detailed statutory mechanism, so this example is only intended to show when the issue may arise.

Why this can be difficult in practice

The main difficulty is that the supplied source is only a heading, not the substantive guidance or legislation. That means it identifies the topic but does not explain:

• the statutory test for an abnormal increase;
• how the rent is recalculated if the rule applies; or
• whether there are exceptions or safe harbours.

There is also a practical judgement issue. Not every stepped rent or increasing rent is abnormal. Many leases contain genuine review provisions or commercial rent phasing. The difficult cases are those where the increase may be seen as out of line with ordinary market practice or structured mainly to affect SDLT.

Because the manual is not the law, the final answer must come from the legislation and any fuller official material explaining how HMRC applies it.

Key takeaways

• Abnormal rent increases are a recognised SDLT issue for lease rent calculations.
• An unusual rent pattern may require more than a simple reading of the lease rent schedule.
• For Scottish transactions from April 2015, SDLT is not the relevant tax; LBTT applies instead.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Stamp Duty Land Tax: Abnormal Rent Increases and Scottish Tax Changes

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