Understanding Tenancy at Will: Definitions, Legal Implications, and SDLT Exemption

Tenancies at Will and SDLT

A tenancy at will is treated in law as a type of lease, but for Stamp Duty Land Tax it is an exempt interest, so it is outside the SDLT charge. This usually matters where someone is allowed into property on a temporary and easily ended basis while a formal lease, sale, or other arrangement is being finalised.

• A tenancy at will exists where a person occupies as tenant with the owner’s consent and either side can end the arrangement at any time.
• It can be written or informal, ends automatically on death of either party or on a sale by the owner, and cannot be assigned.
• HMRC’s view is that there is no conflict in calling it a lease while also treating it as exempt from SDLT.
• The main practical issue is factual: the label used by the parties matters less than the true legal nature of the arrangement.
• If the facts suggest a fixed-term lease, periodic tenancy, or a more durable right to occupy, the SDLT position may be different.
• A later formal lease is considered separately; the exemption only applies to the tenancy at will itself.

Scroll down for the full analysis.

Tenancies at will and SDLT: why they are treated as leases but remain outside charge

This page explains how Stamp Duty Land Tax applies to a tenancy at will. The short answer is that a tenancy at will is treated as a type of lease, but it is also an exempt interest. In practice, that means it sits outside the SDLT charge. This matters because a tenancy at will is often used for short-term occupation pending a formal lease, completion of a sale, or another temporary arrangement.

What this rule is about

A tenancy at will is a very specific kind of occupation arrangement. A person occupies land as tenant, with the owner’s consent, but either side can end the arrangement at any time. It is not the same as occupation as an employee, caretaker, licensee, servant, or agent.

The official material also highlights some legal features that help identify it:

• it may be written down or entirely informal
• either party can terminate it at any time
• it ends automatically if either party dies
• it also ends automatically if the owner sells the land
• it does not create an estate in land
• it cannot be assigned to someone else

The SDLT issue arises because SDLT applies to land transactions, including leases. The question is whether a tenancy at will is caught, and if not, why not.

What the official source says

The HMRC manual says that a tenancy at will is an exempt interest under section 48(2)(c)(i) of Finance Act 2003. Because it is an exempt interest, it is outside the scope of the SDLT regime.

The manual also recognises that this may appear inconsistent with provisions in Schedule 17A to Finance Act 2003, which treat a tenancy at will as a lease for certain SDLT purposes. HMRC’s explanation is that there is no real conflict. The combined effect of the legislation is:

• a tenancy at will is a lease
• but it is a particular kind of lease that is exempt from SDLT

So the legal classification matters, but the exemption still keeps it outside the charge.

What this means in practice

If the arrangement is genuinely a tenancy at will, SDLT does not apply to that interest. That is the practical consequence of it being an exempt interest.

This is important because temporary occupation arrangements are sometimes loosely described as licences, short lets, or interim leases when the legal position is not yet clear. For SDLT purposes, the label used by the parties is less important than the actual legal nature of the arrangement.

The key practical point is this: if an occupier is in possession as tenant, with the owner’s consent, and either side can end the arrangement at any time, the arrangement may be a tenancy at will. If so, the manual says it is outside SDLT.

But that conclusion depends on the arrangement really having those features. If the facts point instead to a fixed-term lease, a periodic tenancy, or another more substantial land interest, the SDLT position may be different.

How to analyse it

A sensible way to approach the issue is to ask the following questions.

• Is the occupier in possession as tenant, rather than merely acting as servant, agent, or in some other capacity?
• Did the owner consent to the occupation?
• Can either party end the arrangement at any time?
• Does the arrangement have the fragile, temporary character described in the official material?
• Would it automatically end on death of either party or on a sale by the owner?
• Is there anything in the facts suggesting a more durable leasehold interest instead?

If the answers point to a true tenancy at will, the HMRC position is that it is an exempt interest and outside SDLT.

It is also helpful to keep two legal ideas separate:

• classification: a tenancy at will is still a lease in legal terms
• chargeability: despite being a lease, it is exempt and therefore not within SDLT

That distinction explains why the legislation can refer to a tenancy at will as a lease without bringing it into charge.

Example

Suppose a business is allowed into premises while the parties negotiate a full commercial lease. The business pays for occupation and goes into possession with the landlord’s consent, but both sides agree that either can end the arrangement immediately at any time. No fixed term is granted, and the arrangement is only intended to last until either the formal lease is completed or negotiations stop.

If the arrangement is genuinely a tenancy at will, the HMRC manual indicates that it is an exempt interest. In that case, the tenancy at will itself falls outside SDLT.

That does not answer the SDLT treatment of any later formal lease. The exemption only explains the position of the tenancy at will itself.

Why this can be difficult in practice

The main difficulty is factual characterisation. Temporary occupation arrangements do not always stay within the narrow boundaries of a tenancy at will. An arrangement may begin as a tenancy at will but, depending on what the parties actually agree and how the occupation operates, the facts may support a different legal analysis.

Particular care is needed where:

• there is written wording that looks more like a fixed-term lease
• the parties behave as though the occupier has continuing rights that cannot be ended immediately
• the arrangement continues for some time without the expected formal lease being completed
• the description used by the parties does not match the legal substance

The official material dealt with here is limited. It clearly states the SDLT consequence if there is a tenancy at will, but it does not set out a full test for distinguishing a tenancy at will from other forms of occupation. That means the legal classification may still require careful analysis of the facts.

Key takeaways

• A tenancy at will is a form of lease, but for SDLT it is an exempt interest.
• If the arrangement is genuinely a tenancy at will, it falls outside the SDLT regime.
• The difficult question is often not the tax rule itself, but whether the facts truly amount to a tenancy at will.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Understanding Tenancy at Will: Definitions, Legal Implications, and SDLT Exemption

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