Examples of Stamp Duty Land Tax Calculations for Residential and Non-Residential Leases

SDLT on Lease Rent and Rate Thresholds

For leases granted for rent only, with no premium, SDLT is based on the net present value (NPV) of the rent over the lease term, not the annual rent. No SDLT is due unless the NPV goes above the relevant threshold, and if it does, the 1% rate applies only to the amount above that threshold. Linked leases can change the calculation because their rental values may need to be added together, and where linked leases include both residential and non-residential property, the non-residential threshold applies.

• For residential rent-only leases, the threshold in these examples is £125,000; for non-residential leases, it is £150,000.
• If the NPV is below the relevant threshold, the rent element is charged at 0%, so no SDLT is due on the rent.
• If the NPV exceeds the threshold, SDLT is charged at 1% only on the excess, not on the full NPV.
• Linked leases between the same parties as part of a single scheme or arrangement may have to be aggregated before deciding if the threshold is crossed.
• Where linked transactions include both residential and non-residential leases, the non-residential threshold is used.
• Even if no SDLT is payable, a separate question may still arise about whether an SDLT return must be filed.

Scroll down for the full analysis.

SDLT on lease rent: how the rate thresholds work in these examples

This page explains how Stamp Duty Land Tax applies where a lease is granted for rent only, with no premium. The key point is that SDLT on rent is based on the lease’s net present value, and the tax only starts once the relevant threshold is exceeded. The examples also show how linked leases can change the result, and why mixed residential and non-residential arrangements need special care.

What this rule is about

SDLT on leases is not worked out in the same way as SDLT on a freehold purchase. Where the consideration consists only of rent, the question is not the yearly rent by itself. Instead, the relevant figure is the net present value, often shortened to NPV, of the rent payable over the term of the lease.

The source material is dealing with one specific step in that calculation: once you have the NPV, which rate threshold applies, and how much of that NPV is charged at 1%.

The examples distinguish between:

• residential leases, where the threshold shown in the source is £125,000
• non-residential leases, where the threshold shown in the source is £150,000
• linked transactions, where the relevant rental values may need to be added together before deciding whether the threshold is crossed
• mixed sets of leases, where residential and non-residential leases are linked and the non-residential threshold applies

What the official source says

The official material gives six examples.

For a residential lease granted on 1 June 2018, if the NPV of the rent is £35,350, that is below the £125,000 residential threshold, so the 0% rate applies to the whole amount and no SDLT is due.

If the NPV of the rent under a residential lease is £145,350, that exceeds the £125,000 residential threshold. SDLT is then charged at 1% on the excess over £125,000, not on the full £145,350.

For a non-residential lease, such as a shop lease granted on 31 March 2018, if the NPV is £135,350, that is below the £150,000 non-residential threshold, so no SDLT is due.

If the NPV under a non-residential lease is £165,350, SDLT is charged at 1% on the excess over £150,000.

The source then moves to linked transactions. If two wholly non-residential leases are entered into between the same landlord and tenant as part of a single scheme, arrangement or series of transactions, their relevant rental values are aggregated. In the example, £135,350 and £15,650 are added together, giving £151,000. Because that exceeds the £150,000 non-residential threshold, the 1% rate applies to the excess over £150,000.

Finally, the source gives an example where one linked lease is non-residential and the other is residential. The rents are still aggregated. In that situation, because the series of transactions combines residential and non-residential leases, the non-residential threshold applies. In the example, the combined NPV is £141,000, which is below £150,000, so no SDLT is due.

What this means in practice

The practical message is simple: for rent-only leases, SDLT does not automatically arise just because rent is payable. You first identify the lease’s NPV, then compare it with the correct threshold.

If the NPV is below the relevant threshold, the rent element is charged at 0%.

If the NPV is above the threshold, SDLT is charged only on the slice above that threshold.

This matters because a reader might wrongly assume that once the threshold is crossed, 1% applies to the whole NPV. That is not what these examples show. The charge is only on the excess.

It also matters because separate leases cannot always be looked at in isolation. If they are linked transactions, their rental values may have to be combined. A transaction that would be below the threshold on its own may become taxable once linked with another lease.

The mixed-use example is especially important. If linked transactions include both residential and non-residential leases, the source says the non-residential threshold applies. That can produce a lower charge, or no charge, than if the residential lease were looked at on its own.

How to analyse it

A sensible way to approach these cases is:

• Identify whether the transaction is a lease and whether the consideration consists only of rent.
• Work out the net present value of the rent payable.
• Decide whether the lease is residential or non-residential.
• Check whether there are any other leases or land transactions that are linked.
• If there are linked transactions, add together the relevant rental values where the rules require aggregation.
• Decide which threshold applies: residential or non-residential.
• Apply 0% up to the threshold and 1% to the excess shown in the source material.

Questions worth asking include:

• Is there only one lease, or were several leases entered into as part of the same deal?
• Are the transactions between the same parties?
• Were they part of a single scheme, arrangement, or series of transactions?
• Are all the leases non-residential, or is there a mixture of residential and non-residential property?
• Has the NPV been calculated correctly before applying the threshold?

Example

Illustration: a tenant takes a lease of office space from a landlord, with an NPV of rent of £149,000. On its own, that is below the non-residential threshold of £150,000, so no SDLT would arise on the rent element.

But if, as part of the same arrangement with the same landlord, the tenant also takes a separate storage lease with an NPV of £5,000, the two leases may be linked. The combined relevant rental value becomes £154,000. On the approach shown in the source, SDLT is then charged at 1% on the excess over £150,000, which is £4,000.

Why this can be difficult in practice

The main difficulty is often not the rate itself, but deciding what must be included before the rate is applied.

First, linked transaction analysis can be fact-sensitive. The source gives clear examples where leases are between the same landlord and tenant and form part of a single deal or arrangement. In real cases, that may be less obvious. Timing, commercial context, and the overall structure of the deal may matter.

Second, classification can affect the threshold. The source distinguishes residential from non-residential leases, and says that where linked transactions combine the two, the non-residential threshold applies. That means the property analysis must be done carefully.

Third, the examples are limited to rent-only consideration. They do not address leases where there is also a premium or other chargeable consideration. In those situations, other SDLT rules may also need to be considered.

Finally, the source refers separately to notification requirements where no SDLT is due. A nil tax result does not always answer the separate question of whether a return is required. The source flags that point but does not set out the full notification rules here.

Key takeaways

• For rent-only leases, SDLT is tested against the net present value of the rent, not simply the annual rent.
• If the relevant threshold is exceeded, the 1% rate applies only to the excess over that threshold.
• Linked leases can change the result because their rental values may need to be aggregated, and mixed residential and non-residential linked leases use the non-residential threshold in the source material.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Examples of Stamp Duty Land Tax Calculations for Residential and Non-Residential Leases

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