Tenant obligations in a lease: what counts for stamp duty?
In brief
Many normal duties in a new lease do not add to the amount used to work out SDLT. This includes repair, insurance, service and management duties.
- Read what the payment actually covers
- Do not rely only on the lease label
- Split combined payments on a fair basis
Scroll down for the full analysis.
Read the original guidance here:
Tenant obligations in a lease: what counts for stamp duty?
Not every sum mentioned in a lease adds to your stamp duty land tax bill. New leases usually exclude ordinary tenant duties. The difficult part is often a lease that puts several things into one payment.
What this rule is about
A lease can require you to do much more than pay rent. Depending on the lease’s terms, you may need to repair the property, arrange insurance, pay service charges, or meet costs that would otherwise fall on the landlord. These are tenant duties.
Those promises can sound like part of the price for the lease. Usually, they are not treated that way for SDLT. This matters because a lease may contain large service or repair costs.
What is the point of the rule? It separates the rent and true price of the lease from normal duties of being a tenant.
What the official source says
HMRC’s manual says that several tenant duties do not count as chargeable consideration, meaning amounts included when SDLT is worked out, on the grant of a new lease. The legislation contains the main list.
- A promise to repair, maintain or insure the leased property is left out.
- A promise to pay for services, repairs, maintenance or insurance is left out.
- A promise to meet the landlord’s management costs is left out.
- Another tenant duty is left out if it would not affect the rent in the open market.
- A guarantee that rent or another tenant duty will be met is left out.
- A penal rent for breaking a lease duty is left out.
- Some landlord costs linked to statutory lease extension or enfranchisement rights are left out.
- Other reasonable landlord costs of, or linked to, granting the lease are left out.
- An agricultural tenant’s duty to transfer certain farm-payment rights at lease end is left out.
HMRC also says the result is the same if the lease labels these payments as rent. A label is not decisive.
What this means in practice
Do not total every lease payment. Instead, when the lease makes you pay a combined amount, first identify the actual rent and then separate any payments that meet one of these excluded duties before working out SDLT. The split matters.
This is especially useful for commercial leases with a service charge. A service charge can be substantial, but its size alone does not make it part of the amount used for SDLT.
- Keep the lease’s rent clause separate from its service-charge clause.
- Check whether a repair or insurance payment is a tenant duty.
- Read any agreement requiring you to meet the landlord’s legal or grant costs.
- Do not assume a sum counts merely because the lease calls it rent.
- Keep documents that explain what each payment covers.
There is a related rule when a lease ends. If you pay to be released from one of the listed duties, that payment does not count for SDLT on the surrender.
How to analyse it
Read the lease, not the payment heading. Then ask what the payment actually buys or what duty it meets.
- Is this a new lease being granted, or a payment on its surrender?
- What exact payment, promise or guarantee does the lease require?
- Does it pay for repairs, maintenance, insurance, services or management?
- Is it a landlord cost connected with granting or extending the lease?
- If it is another duty, would it change what a tenant would pay in the open market?
- Does one combined sum cover both rent and an excluded item?
- If so, what split is just and reasonable on the available evidence?
That last question is the one people miss. A combined figure cannot be treated as all rent just because it is convenient.
Example
Amir takes a new shop lease. Although the lease requires £12,000 each year in one combined payment, the lease papers and budget show that £9,000 is rent while £3,000 pays for building services and insurance. The split is documented.
Because the £3,000 is paid with the rent, it is not automatically added, and the payment should instead be split on a just and reasonable basis using the lease papers and budget. Separate rent from excluded service payments. On these facts, the working figure would separate £9,000 of rent from £3,000 for excluded services and insurance.
Change the facts, though, and the answer may change. If the paperwork gives no reliable split, the parties need evidence to support one.
Why this can be difficult in practice
Lease drafting is not always neat. When one clause combines rent, cleaning, repairs, insurance and management in a single annual figure, the drafting creates a valuation and evidence problem because the amount still has to be divided rather than simply treated as rent for SDLT. The split cannot be ignored.
The open-market-rent point can be harder still. An unusual duty may reduce the rent a tenant would otherwise agree to pay. The answer depends on the real commercial effect of that duty.
- Calling a service charge “rent” does not settle the SDLT treatment.
- A single payment needs a fair split where it covers different things.
- The lease alone may not show how a combined payment should be divided.
- Landlord costs must fall within the specific exclusions and be reasonable where that condition applies.
- An unusual tenant promise may need market evidence before its effect is clear.
Key takeaways
- Normal tenant repair, insurance and service duties are generally left out.
- Payments made to meet those excluded duties are also left out.
- Split a combined rent and service payment fairly, using evidence.
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 section 50 — schedule rules for amounts paid on land deals
- FA 2003 Schedule 17A para 10 — tenant obligations excluded from lease payment calculations
- FA 2003 Schedule 4 para 4 — fairly splitting a combined payment between different matters
- The Stamp Duty Land Tax (Amendment to the Finance Act 2003) Regulations 2006, reg 4 — added exclusions for landlord costs and farm payment rights (could not parse a provision)
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
- Working out whether an unusual obligation would affect open-market rent can need evidence and judgement.
- There may be more than one reasonable way to split a combined payment, depending on the lease terms and facts.
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 signed lease and any side letters
- A breakdown of rent, service charge and other sums
- Invoices or estimates for landlord costs
- Evidence supporting any split of a combined payment
- Details of any payment made when the lease ends
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 Tenant obligations in a lease: what counts for stamp duty? [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 section 50 - schedule rules for amounts paid on land deals https://www.legislation.gov.uk/ukpga/2003/14/section/50/2025-11-17 - FA 2003 Schedule 17A para 10 - tenant obligations excluded from lease payment calculations https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/10/2025-11-17 - FA 2003 Schedule 4 para 4 - fairly splitting a combined payment between different matters https://www.legislation.gov.uk/ukpga/2003/14/schedule/4/paragraph/4/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm11060 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 - Working out whether an unusual obligation would affect open-market rent can need evidence and judgement. - There may be more than one reasonable way to split a combined payment, depending on the lease terms and facts. 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: Tenant obligations in a lease: what counts for stamp duty?
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