Example of SDLT Calculation for Lease with Variable Rent Adjustments

SDLT on a Lease Where Future Rent Is Unknown at the Start

When a lease includes a future market rent review and the later rent is not known when the lease is granted, SDLT must still be filed on time. The tenant should calculate the rent element using the net present value of the lease rents, based on a reasonable estimate of the unknown rent, and then amend the SDLT return once the actual rent is agreed.

• SDLT on lease rent is based on the net present value of the rents payable over the lease term.
• If part of the rent is unascertainable at the grant date, such as after an open market rent review, the tenant must use a reasonable estimate in the initial return.
• The return cannot be delayed until the reviewed rent is agreed; normal SDLT filing and payment deadlines still apply.
• When the actual reviewed rent becomes known, the tenant must recalculate the net present value and amend the SDLT return within the required time limit.
• In HMRC’s example, a five-year lease started at £150,000 a year for years 1 and 2, with years 3 to 5 estimated at £160,000 and later fixed at £165,000, requiring an amended return and any extra SDLT to be paid.

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SDLT on a lease where future rent is not yet known: market rent review example

This page explains how SDLT works when a lease starts at a fixed rent, but a later rent review means some of the rent cannot be known at the grant date. The key point is that SDLT on lease rent is calculated using the net present value of the rent, so if part of that rent is uncertain at the outset, the tenant must use a reasonable estimate first and then correct the return when the actual figure becomes known.

What this rule is about

For SDLT on the grant of a lease, tax on the rent element is based on the net present value of the rents payable over the term. That calculation has to be made when the lease is granted and the SDLT return is filed.

The difficulty is that some leases do not fix all future rent from day one. A common example is a rent review to open market rent. At the grant date, nobody yet knows exactly what that market rent will be. The legislation therefore allows the tenant to use a reasonable estimate for the unknown amount and then revisit the position once the figure is settled.

What the official source says

The source example deals with a lease granted on 1 January 2021 for five years.

• Years 1 and 2 rent: £150,000 a year
• Years 3 to 5 rent: to be increased on 1 January 2023 to current market rent

Because the rent for years 3 to 5 is not ascertainable at the date of grant, a reasonable estimate must be used when calculating SDLT. In the example, the estimate is £160,000 a year for years 3 to 5, and the SDLT return is filed by 15 January 2021.

The rent review is later concluded on 1 July 2023. The actual market rent for years 3 to 5 turns out to be £165,000 a year.

HMRC’s view in the example is that an amended return must then be made by 31 July 2023, using the actual figures, and any extra SDLT must be paid using the original UTRN.

What this means in practice

If a lease contains a future market rent review and the reviewed rent is not known when the lease is granted, the tenant cannot wait until the review is agreed before filing the SDLT return. The return still has to be filed on time, using a reasonable estimate for the uncertain rent.

That estimate matters because it feeds into the NPV calculation. If the eventual rent is higher than estimated, there may be additional SDLT to pay. If it is lower, the amended figures may reduce the tax position.

In practical terms, there are two stages:

• At grant: file the SDLT return using a reasonable estimate of the uncertain rent.
• When the rent becomes known: recalculate the NPV using the actual figures and amend the return within the required time.

The source example shows that the amendment is triggered when the rent review is concluded and the actual reviewed rent becomes known.

How to analyse it

A sensible way to approach this is:

• Identify which rent is fixed at the grant date and which rent is still unknown.
• Ask whether the unknown amount is genuinely unascertainable at that date. A market rent review often will be.
• Make a reasonable estimate of the uncertain rent for SDLT filing purposes.
• Calculate the NPV using the known rent and the estimate.
• File and pay SDLT on the normal timetable for the grant of the lease.
• Monitor the lease until the uncertain rent is finally determined.
• Once the actual rent is known, recalculate the NPV using the real figures and amend the return within the applicable deadline.

The practical question is not whether the reviewed rent might change. It is whether, at the filing date, the amount is ascertainable. If it is not, estimation is required.

Example

A tenant takes a five-year lease starting on 1 January 2021. The rent is £150,000 a year for the first two years. From 1 January 2023, the lease says the rent will be the open market rent, to be agreed later.

At the grant date, the tenant estimates that market rent for years 3, 4 and 5 will be £160,000 a year. The SDLT return is filed on that basis.

On 1 July 2023, the review is settled and the actual rent for years 3 to 5 is fixed at £165,000 a year. The tenant must then recalculate the NPV using £165,000, amend the SDLT return by 31 July 2023, and pay any additional SDLT due.

Why this can be difficult in practice

The source example is clear on the mechanics, but real cases can raise harder questions.

• What counts as a reasonable estimate may be debatable if there is little market evidence at the grant date.
• It may not always be obvious when the rent has become sufficiently certain to trigger the amendment obligation, especially if negotiations are prolonged or subject to formal documentation.
• Some leases have more complicated review machinery than a simple market rent clause, which can make it harder to separate known rent from uncertain rent.
• The SDLT effect depends on the NPV calculation, so even a modest change in annual rent can alter the tax outcome.

The source material does not set out a full test for reasonableness of the estimate. It simply shows that an estimate must be used where the rent is unascertainable and that the return must later be corrected when the actual figure is known.

Key takeaways

• If future lease rent is not ascertainable at the grant date, SDLT is still filed on time using a reasonable estimate.
• When the actual rent is later fixed, the tenant must recalculate the NPV and amend the return.
• A market rent review can therefore create a second SDLT compliance step after the lease has already been granted.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Example of SDLT Calculation for Lease with Variable Rent Adjustments

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