Example of Stamp Duty Calculation for Lease with Variable Rent Increases

SDLT on lease rent where fixed increases are known from the start

When a lease sets out fixed rent increases that are already known when it is granted, those higher rents are included in the original SDLT net present value calculation. HMRC’s example shows that where the increases are fixed, fall within the first five years and are not linked to RPI, there is normally no need to review the SDLT return later.

• SDLT on lease rent is worked out using the net present value of the rent over the term, not just the first year’s rent.
• If the lease states the future rent figures or a fixed formula from the outset, those known amounts are used in the original calculation.
• HMRC’s example is a four-year lease starting at £100,000 a year, rising by 4% annually to £104,000, £108,160 and £112,486.
• No later review is needed where the increases are fixed from the start and are not estimated, contingent or dependent on a future rent review.
• Care is needed if rent depends on RPI, market review, turnover or other future events, as different SDLT rules may apply.

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SDLT on lease rent: fixed annual increases known at the start

This page explains how Stamp Duty Land Tax works where a lease contains rent increases that are already fixed and known when the lease is granted. The point matters because SDLT on rent is based on the lease’s net present value, and the treatment of future rent changes affects both the amount of tax due and whether the return may need to be reviewed later.

What this rule is about

For SDLT on leases, rent is not taxed simply by looking at the first year’s figure. Instead, the rent over the term is brought into the calculation through the net present value, or NPV. Problems often arise where rent changes over time. Some changes are certain from the outset. Others depend on future events, estimates, or review mechanisms.

The source material deals with a straightforward case: the lease says from the start that the rent will rise by a fixed percentage each year. Because those increases are known at the date of grant, they are built into the original NPV calculation.

What the official source says

The official example concerns a lease granted on 1 April 2018 for four years. The initial annual rent is £100,000, and it increases by 4% each year.

HMRC’s example says the NPV is calculated using the actual stepped rents for each year because:

• the increases are known at the date the lease is granted;
• they fall within the first five years of the lease term; and
• they are not linked to RPI.

On that basis, the rent figures used in the NPV calculation are:

• Year 1: £100,000
• Year 2: £104,000
• Year 3: £108,160
• Year 4: £112,486

The source also states that no later review is needed. That is because the increases are neither estimated nor contingent. They are fixed by the lease from the outset and are included in the original calculation.

What this means in practice

If the lease tells you exactly how the rent will increase, you do not ignore those increases and file SDLT based only on the starting rent. You use the actual known rent for each relevant year when working out the NPV.

This usually makes the SDLT calculation more accurate at the start and avoids the need for a later adjustment, at least so far as those fixed increases are concerned.

The practical distinction is between:

• rent that is fixed or ascertainable when the lease is granted; and
• rent that is uncertain, estimated, contingent, or dependent on a future review outcome.

Where the increase is fixed in the lease itself, HMRC’s example treats it as part of the original rent profile. There is nothing to wait and see about.

How to analyse it

When looking at a lease with changing rent, ask these questions:

• Does the lease state the future rent figures, or a fixed formula that makes them known at the start?
• Are the rent changes within the first five years of the term?
• Are the increases linked to RPI, or are they fixed increases outside that type of indexation?
• Is any part of the future rent contingent on an event, turnover, review, or later determination?
• Is the figure being used an actual known amount, or only an estimate?

If the future rents are known at the date of grant and fall to be included under the SDLT lease-rent rules, they should be used in the original NPV calculation. If they are only estimated or depend on future events, different rules may apply and a later review may sometimes be needed.

Example

Illustration: a tenant takes a four-year lease beginning on 1 April 2018. The lease says the rent is £100,000 in year 1 and rises by 4% each year after that. The rents used for SDLT are therefore £100,000, £104,000, £108,160 and £112,486.

In this situation, the SDLT return is prepared using those figures from the outset. There is no need to revisit the calculation later just because the rent stepped up as the lease had already specified.

Why this can be difficult in practice

The main difficulty is not the arithmetic. It is identifying whether a rent change is truly fixed and known at the start, or whether it depends on something uncertain.

For example, a lease may contain review wording that looks mechanical but still depends on future facts, market evidence, turnover figures, or index movements. In those cases, the rent may not be fully known at the date of grant. The source material does not set out those wider rules in detail, but it makes clear that fixed known increases are treated differently from estimated or contingent rent.

Another point is that HMRC’s example specifically notes that the increases are within the first five years and are not calculated in line with RPI. That means readers should be careful before applying the same treatment to leases with longer review patterns or index-linked rent, because those situations may fall under different SDLT rules.

Key takeaways

• Fixed rent increases known when the lease is granted are included in the original SDLT NPV calculation.
• If those increases are not estimated or contingent, HMRC’s example says no later review is required.
• The key practical question is whether the future rent is genuinely known at the start, rather than dependent on later events or calculations.

This page was last updated on 24 March 2026

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

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