Stamp duty on lease rent that rises by a fixed amount
Fixed rent rises under a lease
For SDLT on lease rent, known increases are included in the original NPV calculation. In HMRC’s seven-year example, years after year five use the highest annual rent from the first five years.
- Known increases are not estimates.
- Year-five rent sets the later-year figure in this example.
- HMRC says no later review is required on these facts.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on lease rent that rises by a fixed amount
When a lease sets the rent to rise by a fixed amount each year, put those known amounts into the stamp duty calculation. Use them. After year five, a special rule uses the highest annual rent from the first five years. In its example, HMRC does not call for a later review.
What this rule is about
Stamp duty land tax, or SDLT, may apply to rent paid under a lease. You do not work it out by simply adding every rent bill. Instead, the calculation uses net present value, often shortened to NPV.
NPV gives less weight to rent paid further in the future. That sounds technical, but the key issue here is simpler: which annual rent figures go into the calculation?
What the official source says
HMRC’s manual sets out an example of a seven-year lease granted on 1 April 2018. The starting rent is £100,000 a year. The lease itself says rent rises by 4% each year.
Since the lease fixes those rises from the start, HMRC tells taxpayers to use the first five annual figures as stated, even though rent increases each year. They are not estimates.
For years six and seven, HMRC directs the calculation to use the highest rent in any 12-month period during those first five years. That is the rule.
- Year 1 rent is £100,000.
- Year 2 rent is £104,000.
- Year 3 rent is £108,160.
- Year 4 rent is £112,486.
- Year 5 rent is £116,986.
- Years 6 and 7 each use £116,986.
What this means in practice
A fixed annual increase is still variable rent in the everyday sense, but it is not a guess because the lease states what falls due in every early year. You can include those amounts in the original NPV calculation.
People can miss that the original calculation remains final even when the rent does not stay flat. What matters is whether the lease already set out the rise, rather than leaving it to something unknown.
- Keep the clause that sets out each increase.
- Prepare a rent schedule for every lease year.
- Use the actual known amounts for the first five years.
- Find the highest consecutive 12-month rent in that period.
- Use that amount for each later year in the NPV calculation.
How to analyse it
Start with the lease wording, not the label on the rent clause. A clause called a review may still set a fixed rise. Equally, a clause that appears simple may depend on a future event.
- Check the lease term and its start date.
- List rent payable in each of the first five years.
- Ask whether every increase was fixed when the lease was granted.
- Identify the highest rent for any consecutive 12-month period in those years.
- Apply that annual amount after the fifth year.
- Check whether any early rent amount was uncertain or dependent on an event.
Example
In HMRC’s example, the 4% increase produces £116,986 in year five. That is the highest annual rent in the first five years, covering months 49 to 60.
It therefore supplies the figure for year six and year seven when working out NPV. HMRC calls for no review because none of the known increases was estimated or dependent on an event.
Why this can be difficult in practice
It is easy to assume that any rent review will force someone to revisit the figure later. It will not.
A fixed formula can produce a known amount. By contrast, a market-rent review, turnover rent, or payment linked to an event may leave the amount uncertain.
The wording and timing matter. A small drafting difference can change whether the first five years use stated figures or an estimate.
- A fixed percentage rise is different from a future market review.
- Turnover rent may depend on future trading results.
- Index-linked rent has its own statutory treatment.
- A rent-free period can affect the annual figures.
- Linked leases may require a combined calculation.
Key takeaways
- Use known yearly rent rises in the original NPV calculation.
- After year five, use the highest annual rent from the first five years.
- HMRC’s example needs no later review because the rises were fixed.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- FA 2003 Schedule 5 para 2 — tax calculation on rent paid under leases
- FA 2003 Schedule 5 para 3 — net present value calculation for lease rent
- FA 2003 section 51 — treatment of contingent and uncertain payment amounts
- FA 2003 Schedule 17A para 7 — treatment of variable or uncertain lease rent
- FA 2003 Schedule 17A para 8 — adjustments when early lease rent becomes certain
Official guidance
The pages below are HMRC’s guidance. Guidance is not law. It sets out how HMRC reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. HMRC can also change or withdraw guidance, and it may not cover your facts.
Where this is not settled
- The source does not address whether the property is residential, non-residential or mixed, which can affect the tax calculation.
- The source does not cover linked leases, a premium, rent-free periods, or changes to the lease terms.
- For a transaction after 17 November 2025, the current statutory text should be checked before publication or reliance.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The signed lease and any rent review clauses.
- A year-by-year schedule of rent due for the whole term.
- Evidence that each 4% increase was fixed in the lease from the start.
- The lease grant date, term, property type, and details of any linked transaction.
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching UK Stamp Duty Land Tax (SDLT), which applies in England and Northern Ireland. MY QUESTION Stamp duty on lease rent that rises by a fixed amount [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - FA 2003 Schedule 5 para 2 - tax calculation on rent paid under leases https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 3 - net present value calculation for lease rent https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 section 51 - treatment of contingent and uncertain payment amounts https://www.legislation.gov.uk/ukpga/2003/14/section/51/2025-11-17 - FA 2003 Schedule 17A para 7 - treatment of variable or uncertain lease rent https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/7/2025-11-17 - FA 2003 Schedule 17A para 8 - adjustments when early lease rent becomes certain https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/8/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm13220 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from HMRC is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The source does not address whether the property is residential, non-residential or mixed, which can affect the tax calculation. - The source does not cover linked leases, a premium, rent-free periods, or changes to the lease terms. - For a transaction after 17 November 2025, the current statutory text should be checked before publication or reliance. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show Finance Act 2003 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 1 September 2026
Useful article? You may find it helpful to read the original guidance here: Stamp duty on lease rent that rises by a fixed amount
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