Stamp duty on a lease with a market-rent review
Variable lease rent: the short answer
A market-rent review does not mean that rent can be ignored for stamp duty. The first return uses a reasonable estimate, followed by a recalculation when the rent is known.
- Known rent is used for years one to four in HMRC’s example.
- An estimated year-five rent can affect years six and seven.
- Current filing and repayment steps depend on whether more or less tax is due.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on a lease with a market-rent review
Where a lease rent will be fixed later through a market-rent review, it must still be included in the first stamp duty land tax return. Estimate the uncertain rent at that stage. You may then have to recalculate after the rent is known.
What this rule is about
Rent may form part of the amount used to calculate stamp duty on a lease. SDLT calculates the rent’s net present value, usually called NPV. Put simply, this converts future rent payments into a value at the beginning of the lease.
A market-rent review creates an issue because the reviewed rent is unknown when the lease begins. That uncertainty does not prevent the calculation. The law uses an estimate instead.
The first five years are particularly important. Events in those years can also determine the rent assumed for later years.
What the official source says
In HMRC’s seven-year example, rents for years one to four are known, while a market-rent review after year four determines the rent for year five. That amount is unknown at the outset.
HMRC says that the original return contains an NPV calculation using the known rent and a reasonable estimate for the uncertain amount. For years after the fifth, the calculation uses the highest annual rent found in any 12-month period during the lease’s first five years of the term. That figure applies to the later years.
- Use the actual known rent for years one to four.
- Make a reasonable estimate of the market rent for year five.
- Find the highest rent for any consecutive 12-month period in the first five years.
- Use that highest figure when working out rent for years six and seven.
The legislation has the same broad structure. It applies the ordinary reasonable-estimate rule to uncertain rent during the first five years. It then assumes the highest annual rent from those first five years.
What this means in practice
Because year five’s rent has not been agreed when the first return is filed, you must include a supportable estimate rather than leave that year out of the calculation. Do not omit it. Retain the material showing how you arrived at the estimate.
When the review sets the rent, compare the recalculated figure with the calculation in the original return. The tax may increase. It may decrease.
- Keep the original NPV calculation.
- Keep market evidence used for the estimate.
- Record the date when the reviewed rent became known.
- Rework years six and seven if the highest first-five-year rent changes.
The manual says that an amended return should be sent by letter to HMRC’s Stamp Taxes team. This is HMRC guidance rather than law. The current legislation provides different routes according to the result.
How to analyse it
Begin with the lease wording instead of the label used for the review. When the lease began, ask which rents were already known, which remained uncertain under its terms, and when the review would make the outstanding amount known. Start there.
- Confirm the lease term and its start date.
- List the rent due in each of the first five years.
- Separate known figures from figures that need an estimate.
- Identify when the review makes the uncertain amount known.
- Find the highest rent in a consecutive 12-month period within those five years.
- Use that figure for the later lease years covered by the calculation.
- Compare the revised NPV with the original NPV and tax paid.
Where the final calculation shows that more tax is due, and the relevant uncertainty has ended, the law may require a further return within 30 days. The deadline is short. If the result makes the deal newly notifiable, the period is 14 days.
Where less tax is due, the buyer may amend the return within the permitted amendment period. Once that period has ended, the legislation instead provides for a repayment claim.
Example
Consider a seven-year lease with known rent for years one to four and a market-rent review after year four, matching the exact shape of HMRC’s example. At the start, there is no final figure for year five. It is estimated.
The original NPV uses the known rent for years one to four together with that estimate for year five. For years six and seven, it then uses the highest actual or estimated 12-month rent found within those first five years. That amount may still be an estimate.
When the review later sets the year-five rent, recalculate the NPV using the final year-five amount. Then consider whether the new amount also changes the highest 12-month rent used for years six and seven.
HMRC’s example gives no rent figures, so no tax total can be shown. Its point is the method rather than a particular bill.
Why this can be difficult in practice
The estimate must be reasonable when the first return is filed. An unsupported guess is risky. Market evidence, comparable lettings and the review clause can all be relevant.
It may seem that only year five changes once the review takes place. That is not always so. A higher reviewed rent may also become the figure used for years six and seven.
- A review date is not always the date the new rent becomes known.
- The lease may contain backdated rent adjustments.
- The highest figure is for a consecutive 12-month period, not simply a calendar year.
- The route for a refund is not necessarily the same as the route for extra tax.
This is the point people often miss: the first five years determine the assumed rent after year five. One review can therefore affect more than one year in the NPV calculation.
Key takeaways
- Estimate uncertain rent in the first five years when filing the original return.
- Use the highest first-five-year annual rent for later years.
- Recalculate when the reviewed rent becomes known and check the statutory route.
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 section 51 — estimating uncertain amounts paid for a land deal
- FA 2003 section 56 — stamp duty calculation where a lease includes rent
- FA 2003 Schedule 5 para 2 — tax calculation using the lease rent’s present value
- FA 2003 Schedule 5 para 3 — how to calculate rent’s net present value
- FA 2003 Schedule 17A para 7 — treatment of variable and uncertain lease rent
- FA 2003 Schedule 17A para 8 — adjustment when uncertain lease rent becomes known
- FA 2003 Schedule 10 para 6 — time limit and requirements for changing a return
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 give the lease start date, the review date, the rent figures or the effective date. Those facts are needed for a full calculation and to identify the applicable procedure.
- The source’s reference to a letter and to thirty days after all uncertainty is resolved does not match the full current wording of the statutory adjustment rules. The correct route needs checking against the dates and facts.
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 side letters about rent.
- The dates when the lease began and when the rent review took effect.
- The original SDLT return and proof of tax paid.
- The review memorandum, valuation evidence and final agreed rent.
- A revised NPV calculation showing rent for each lease year.
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 a lease with a market-rent review [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 section 51 - estimating uncertain amounts paid for a land deal https://www.legislation.gov.uk/ukpga/2003/14/section/51/2025-11-17 - FA 2003 section 56 - stamp duty calculation where a lease includes rent https://www.legislation.gov.uk/ukpga/2003/14/section/56/2025-11-17 - FA 2003 Schedule 5 para 2 - tax calculation using the lease rent's present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 3 - how to calculate rent's net present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 Schedule 17A para 7 - treatment of variable and uncertain lease rent https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/7/2025-11-17 - FA 2003 Schedule 17A para 8 - adjustment when uncertain lease rent becomes known https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/8/2025-11-17 - FA 2003 Schedule 10 para 6 - time limit and requirements for changing a return https://www.legislation.gov.uk/ukpga/2003/14/schedule/10/paragraph/6/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm13230 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 give the lease start date, the review date, the rent figures or the effective date. Those facts are needed for a full calculation and to identify the applicable procedure. - The source's reference to a letter and to thirty days after all uncertainty is resolved does not match the full current wording of the statutory adjustment rules. The correct route needs checking against the dates and facts. 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 a lease with a market-rent review
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