Example of SDLT Calculation for Lease with Variable Rent Over Five Years

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

If a lease states the exact rent payable in each of the first five years, you use those known amounts in the SDLT net present value calculation at the start. A later fixed rent increase does not by itself make the rent uncertain, so there is usually no need to amend or recalculate the SDLT return when that increase takes effect.

• SDLT on leases can be charged on the rent, using the net present value of the rent over the relevant period.
• The key issue is whether the rent for the first five years is known when the lease is granted, or whether it depends on later events or decisions.
• If the lease fixes a stepped rent from the outset, each year’s scheduled rent should be included in the initial SDLT calculation.
• For example, rent of £150,000 for years 1 and 2 and £175,000 for years 3 to 5 is treated as known from the start.
• No later recalculation is needed just because the higher fixed rent begins during the term.
• This differs from cases where rent depends on turnover, indexation, market review or other factors that are not yet known.

Scroll down for the full analysis.

SDLT on lease rent: when fixed future rent increases do not need a later recalculation

This page explains a narrow but important SDLT point for leases: if the rent due in each of the first five years is known when the lease is granted, you use those known figures in the net present value calculation and do not later revisit the return just because the rent increases during that period.

What this rule is about

SDLT on a lease can be charged by reference to the rent as well as any premium. For rent, the tax calculation uses the net present value of the rent payable over the relevant period. Problems often arise where rent is uncertain or can vary. The key question is whether the rent for the first five years is actually unknown at the start, or whether it is already fixed by the lease terms.

This distinction matters because genuinely uncertain or variable rent may require later review, whereas rent that is fixed from the outset can usually be calculated once at the beginning.

What the official source says

The source gives an example of a lease granted on 1 January 2018 for five years. The annual rent is £150,000 at first, increasing to £175,000 on 1 January 2020.

For the net present value calculation, the rent for each of the five years is treated as:

• Year 1: £150,000
• Year 2: £150,000
• Year 3: £175,000
• Year 4: £175,000
• Year 5: £175,000

The source then states that there is no need to revisit the calculation, because the actual rent payable in each of the first five years is known from the outset.

What this means in practice

A rent review or step-up in rent does not automatically make the rent uncertain for SDLT purposes. If the lease itself tells you exactly what the rent will be in each of the first five years, that rent is known at the effective date of the transaction, even if the amount changes later within the term.

In practice, this means:

• you include the scheduled rent for each year in the initial SDLT calculation
• you do not treat the increase as an unknown future event
• you do not make a later recalculation merely because the higher rent starts to apply

The practical consequence is that a fixed stepped rent is dealt with up front. The fact that the rent rises after two years does not by itself create uncertainty.

How to analyse it

When looking at lease rent for SDLT, ask these questions:

• Does the lease fix the amount of rent payable for each of the first five years?
• Is the future increase automatic under the lease, or does it depend on something not yet known?
• Can you identify the actual amount due in each year from the lease terms alone?

If the answer is yes, the rent is known from the outset for this purpose. You use those figures in the net present value calculation.

If the future rent depends on later events, later agreement, turnover, indexation, market review, or some other factor not yet known, the position may be different. That is where uncertainty analysis becomes more important. This example does not deal with those harder cases. It deals only with fixed increases that are already built into the lease.

Example

A tenant takes a five-year lease beginning on 1 January. The lease says the annual rent is £150,000 for the first two years and £175,000 for the remaining three years. Even though the rent changes part-way through the term, the amount due in each year is already fixed when the lease is granted. For SDLT, the net present value calculation uses £150,000 for years 1 and 2 and £175,000 for years 3, 4 and 5. There is no need to revisit the calculation later when the increase takes effect.

Why this can be difficult in practice

Readers often assume that any rent increase makes the rent “variable” or “uncertain”. That is too broad. A fixed stepped rent is variable in the everyday sense, but not uncertain if the lease sets out the exact figures from the start.

The difficulty is separating:

• rent that changes in a predetermined way, which can be calculated immediately, from
• rent that depends on facts or decisions that will only be known later

That distinction affects whether the original SDLT calculation is final or may need to be revisited. The source example only supports the first category.

Key takeaways

• A fixed increase in lease rent does not by itself make the rent uncertain for SDLT.
• If the actual rent for each of the first five years is known from the outset, those figures are used in the net present value calculation.
• On the source example, no later recalculation is needed when the higher rent starts to apply.

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 Over Five Years

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