Stamp duty on a lease when rent changes after a market review
In brief
For an uncertain market rent review, the original SDLT calculation uses a reasonable estimate for rent in the first five years. Later rent is based on the highest rent in those five years.
- A settled review can require a revised calculation.
- Year-five rent uncertainty must still be revisited at the fifth anniversary.
- HMRC’s filing instruction in this source is specific to its historic example.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on a lease when rent changes after a market review
Stamp duty on a lease when rent changes after a market review
If a future market review sets your lease rent, you may not know the final figure when you file the stamp duty land tax return, yet you must still include rent in the calculation. For the first five years, use a reasonable estimate.
For later years, use the highest rent from those first five years.
What this rule is about
HMRC can charge stamp duty land tax on a lease’s rent as well as on any premium. To calculate the rent element, use its net present value, usually called NPV.
In simple terms, this calculation combines all rent due over the whole lease into one figure for tax purposes. It creates a single figure.
A market rent review creates a problem: the new rent may be unknown when the lease starts. Before and after the end of year five, the law handles that uncertainty differently.
This is the part people can miss. When the parties later agree the rent, that agreement may require them to revisit the earlier SDLT calculation because the first figure relied on an estimate. As a result, the earlier calculation may change.
What the official source says
HMRC’s example concerns an eleven-year lease starting on 1 January 2018. In that lease, the parties provide for market-level rent reviews in years four and eight. At the start, the rent is £100,000 a year.
Initially, the parties estimated the first review at £125,000, but the final figure was £150,000.
The legislation provides the underlying approach. For rent in the first five years that remains uncertain, the taxpayer uses a reasonable estimate.
For periods after year five, the assumed yearly rent is the highest rent payable in any consecutive twelve-month period during the first five years.
- For years one to four, the example uses the known annual rent of £100,000.
- For year five, it uses the reasonable estimate of £125,000.
- For years six to eleven, it uses £125,000, being the highest rent in the first five years.
- The review in year eight is outside the first five years.
- HMRC does not require an estimate of that year-eight review for the original return.
That approach does not make the first estimate permanent. Once the parties settle the first review, or year five ends, you must reconsider the calculation.
What this means in practice
A market rent review can alter the SDLT calculation years after the parties signed the lease. Timing matters.
You need to establish whether the rent for the first five years remained uncertain and, if it did, when the parties finally knew the amount. That date can matter.
In the source example, the review finished on 1 July 2022. HMRC required a further calculation using £100,000 for years one to four and £150,000 for years five to eleven.
At that stage, the year-eight review was still ignored.
- Keep the estimate used in the original SDLT return.
- Keep correspondence and valuation material about the rent review.
- Record the date when the reviewed rent was finally agreed or decided.
- Check whether the revised NPV produces more SDLT.
- Do not include a later review in the calculation merely because the lease mentions it.
HMRC’s manual says its 2018 example required a return by letter to Stamp Taxes by 31 July 2022. That is HMRC guidance about that example.
Readers should not treat it as a general statement of the current method for filing.
How to analyse it
Start with the rent clause, not the label used for the review. Ask whether the amount payable was genuinely unknown and whether it falls within the first five years of the term.
- Find the first day and final day of the lease term.
- Map the rent payable for each lease year.
- Identify every rent review and its effective date.
- Separate known rent from rent that was estimated.
- Work out the highest annual rent within the first five years.
- Use that highest amount for later years in the NPV calculation.
- Check the date when uncertain first-five-year rent became known.
- Reconsider the SDLT position when that happens, or when year five ends.
Why does the five-year point matter? The law uses the first five years as the benchmark for rent later in the lease.
You do not need to predict every possible review over a long term.
Example
Here is the official source’s illustration. An eleven-year lease starts on 1 January 2018. Rent is £100,000 for years one to four.
A market review affects year five. The tenant estimates the new rent at £125,000 when filing the original return.
For the original NPV calculation, use £100,000 for years one to four and £125,000 for year five. For years six to eleven, it also uses £125,000.
Although another market review is due in year eight, the tenant does not estimate it.
Suppose the first review is settled on 1 July 2022 at £150,000. HMRC’s example then recalculates the NPV, using £100,000 for years one to four and £150,000 for years five to eleven after the first review settles. It still ignores the year-eight review.
If instead the first review remained disputed at the fifth anniversary, HMRC’s example uses a revised estimate of £145,000 at that point. When the review later settles at £150,000, it uses that known figure in a further calculation.
Why this can be difficult in practice
Although the figures may look simple, timing becomes awkward when a review takes months to settle and then takes effect from an earlier date than the settlement. Matching the final figure to the lease years can be hard.
You might think the eighth-year review must be forecast because it affects the rent you will pay. In this example, it does not.
For the later years, the assumed rent comes from the highest amount in the first five years.
- A market review can be unresolved at the fifth anniversary.
- An estimate must be reasonable when it is used.
- The settlement date should be recorded clearly.
- The review’s effective date may differ from its settlement date.
- Different lease wording may produce different facts.
Key takeaways
- Use a reasonable estimate for uncertain rent in the first five years.
- Use the highest first-five-year rent for later years.
- Revisit the SDLT calculation when early rent becomes known or year five ends.
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 56 — tax calculation where lease payments include rent
- FA 2003 section 51 — treatment of contingent and uncertain amounts paid
- FA 2003 Schedule 5 para 2 — rental value is the lease rent net present value
- FA 2003 Schedule 5 para 3 — formula for the net present value of rent
- FA 2003 Schedule 17A para 7 — treatment of variable or uncertain lease rent
- FA 2003 Schedule 17A para 8 — recalculation when early lease rent becomes known
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 explain how a different lease clause, linked lease or rent pattern should be calculated.
- The source’s reference to sending a letter to Stamp Taxes is an HMRC administrative instruction for this historical example, not a general statement of current procedure.
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 every rent-review clause
- the lease start date and length of term
- the original SDLT return and rent calculation
- the original reasonable estimate of reviewed rent
- documents showing when the market rent was agreed or determined
- evidence of any continuing dispute at the fifth anniversary
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 when rent changes after a market 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 56 - tax calculation where lease payments include rent https://www.legislation.gov.uk/ukpga/2003/14/section/56/2025-11-17 - FA 2003 section 51 - treatment of contingent and uncertain amounts paid https://www.legislation.gov.uk/ukpga/2003/14/section/51/2025-11-17 - FA 2003 Schedule 5 para 2 - rental value is the lease rent net present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 3 - formula for the net present value of rent https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - 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 - recalculation when early lease rent becomes known 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/sdltm13240 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 explain how a different lease clause, linked lease or rent pattern should be calculated. - The source's reference to sending a letter to Stamp Taxes is an HMRC administrative instruction for this historical example, not a general statement of current procedure. 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 when rent changes after a market review
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