Stamp Duty Land Tax Notification for Extended Lease Terms and Tax Implications

SDLT on Leases That Continue After the Fixed Term

If a tenant stays in occupation after a lease’s fixed term ends, the lease may be treated for SDLT purposes as having been extended from the original grant date. This can make the lease notifiable for the first time or create extra SDLT, even if no new lease is signed. The key issue is whether the extended term increases the rent’s net present value enough to trigger a filing or more tax.

• A continuing lease can trigger SDLT because the law treats it as an extension of the original lease, which may increase the rent NPV.
• A lease that was not notifiable when granted may later become notifiable if the extended term pushes the NPV above the threshold that applied at the original grant date.
• If the lease was already notified, each further year of holding over may create extra SDLT, which must be notified and paid.
• Crossing a total term of seven years does not by itself make the lease notifiable; the tax result depends on chargeable consideration, especially the NPV of rent.
• The calculation uses the SDLT rules, thresholds, reliefs and VAT position in force when the original lease was granted, not later changes in the law.
• Different deadlines and filing methods apply: first-time notification is generally by SDLT1 within 14 days after the relevant year end, while extra tax on an already notified lease is reported to the Stamp Office within 30 days after each year of holding over.

Scroll down for the full analysis.

SDLT when a lease continues after its fixed term

This page explains when a lease that carries on beyond its original term can trigger a Stamp Duty Land Tax notification or extra SDLT. The key point is that a lease can become notifiable, or give rise to more tax, simply because the tenant remains in occupation and the lease continues by law. That matters because the filing deadline and method of notification depend on whether the lease had already been notified.

What this rule is about

Some leases do not end cleanly on the last day of the fixed term. The tenant may stay in occupation while a renewal is negotiated, or a statutory periodic tenancy may arise automatically. SDLT has special rules for this situation.

For SDLT purposes, the continuing lease is treated as if the original lease has been extended. That can increase the net present value of the rent, often called the NPV. If the higher NPV crosses the relevant threshold, or increases the tax already due, a further SDLT obligation may arise.

This is not the same as saying that every continuation of a lease must be notified. The issue is whether, once the lease is treated as extended, it becomes chargeable or gives rise to additional SDLT.

What the official source says

HMRC says a lease that continues beyond its original term may become notifiable in two broad situations.

First, a lease may not have been notifiable when granted, but later become notifiable because the NPV of the rent over the extended term exceeds the relevant threshold. HMRC says this applies only where the lease was originally for less than seven years and was not chargeable because the consideration was below the threshold in Finance Act 2003, section 55.

Second, a lease may already have been notifiable on grant, but the continuation of the lease may increase the SDLT payable beyond the amount already paid.

HMRC also makes an important negative point: a lease is not notifiable on extension merely because its term has grown to seven years or more. The tax effect depends on the chargeable consideration, in particular the NPV of the rent, not just on the fact that the accumulated term has crossed seven years.

On timing, HMRC distinguishes between two cases.

• If the lease becomes notifiable for the first time on continuation, the return must be made within 14 days of the end of one year after the end of the fixed term or further period.
• If the lease has already been notified, and continuation means SDLT becomes payable or more SDLT becomes payable, notification must be made within 30 days of the end of each year of holding over.

HMRC says that first-time notification should be made in the normal way using form SDLT1 and any relevant supplementary forms. Where the lease was already notified, later notification of additional tax is made by letter to the Stamp Office, giving the original Unique Transaction Reference Number and details of the original and extended terms.

HMRC also states that the continuing lease is treated as having been granted at the same time as the original lease. This has three consequences:

• the NPV is recalculated on that basis;
• later changes in SDLT rates, thresholds or reliefs are ignored;
• if VAT was not chargeable on the rent at the date of grant, later VAT becoming payable is ignored.

What this means in practice

If a tenant stays on after the fixed term, you should not assume nothing needs to be done for SDLT. Each year of holding over can matter.

The practical question is whether the deemed extension changes the SDLT position. In broad terms:

• If the lease was below the line when granted, it may move above the line later because the deemed longer term pushes up the NPV.
• If the lease was already notified and tax was paid, each further year of continuation may increase the total SDLT due, creating an obligation to notify and pay the difference.

The calculation is not done using current SDLT rules. You go back to the rules in force when the original lease was granted, or deemed granted. That can produce results that seem odd if rates or thresholds changed later, but that is the rule HMRC sets out here.

This is especially important for leases that continue by operation of law, such as protected business tenancies or statutory periodic tenancies. The parties may not have signed a new lease, but SDLT can still be affected.

How to analyse it

A sensible way to analyse a continuing lease is to ask these questions in order.

1. Has the lease continued beyond its fixed term, or beyond a further period, by operation of law?
2. Was the original lease notified to HMRC?
3. What was the SDLT position at the original grant date, including the thresholds, rates, reliefs and VAT treatment then in force?
4. What is the NPV of the rent if the lease is treated as extended by the relevant additional year?
5. Does that revised NPV mean:
   • the lease becomes notifiable for the first time, or
   • more SDLT is now due than was previously paid?
6. Which filing route applies:
   • SDLT1 if the lease becomes notifiable for the first time, or
   • a letter to the Stamp Office if the lease had already been notified and additional tax is due?
7. What is the deadline:
   • 14 days after the end of the first year that makes it notifiable for the first time, or
   • 30 days after the end of each year of holding over where the lease had already been notified and more tax becomes due?

It is also worth checking whether the lease has merely reached an aggregate duration of seven years. HMRC’s point is that this fact alone does not trigger notification on extension. The chargeability question still turns on the NPV and the original SDLT framework.

Example

Illustration: a residential lease is granted for four years at a rent that gives an NPV below the residential threshold at the date of grant. Because the term is under seven years and the NPV is below threshold, no SDLT return is needed at the start.

The tenant remains in occupation after the fixed term ends, and the tenancy continues by law. After one extra year, the recalculated NPV is still below the threshold, so there is still nothing to file.

After a second extra year, the lease is now treated as a six-year lease from the original grant date. The recalculated NPV now exceeds the threshold that applied at the original grant date. At that point the lease becomes notifiable for the first time, SDLT is due on the excess above that original threshold, and the return must be made on SDLT1 within the deadline HMRC gives for first-time notification.

The fact that the residential threshold changed several times after the lease was granted does not alter the calculation. The original threshold is still used.

Why this can be difficult in practice

The main difficulty is that the SDLT consequence arises from a deemed extension, not necessarily from a new signed document. In practice, people may overlook the SDLT effect because the parties are simply carrying on while negotiations continue.

Another difficulty is timing. HMRC uses different deadlines depending on whether the lease is becoming notifiable for the first time or whether it was already notified and now gives rise to more tax. Getting that distinction wrong can lead to the wrong filing method and the wrong deadline.

There is also a technical trap in the calculations. The NPV must be recalculated using the law as it stood at the original grant date. It is easy to assume current thresholds or current VAT treatment should apply, but HMRC says they do not.

Finally, the source material here deals with notification when a lease continues, not the full law on when and how a lease is treated as continuing. In some cases, identifying whether there has been a continuation by operation of law, and for what period, may itself require careful analysis of the tenancy arrangement.

Key takeaways

• A lease that continues after its fixed term can become notifiable, or trigger extra SDLT, even if no new lease is signed.
• The tax calculation is based on the original grant date rules, not later changes in thresholds, rates, reliefs or VAT status.
• A lease is not notifiable on extension just because its total term has grown to seven years or more; the NPV and resulting SDLT position are what matter.

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 Notification for Extended Lease Terms and Tax Implications

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