Stamp duty on an indefinite lease: the first-year rule
Indefinite leases and SDLT
For initial SDLT purposes, a lease with no fixed end date is treated as lasting one year.
- This can affect tax on rent and other payments.
- Notification follows the statutory rules for short leases.
- Recheck the position if the lease continues beyond year one.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on an indefinite lease: the first-year rule
A lease with no set end date is not treated as endless for stamp duty at the outset. For SDLT, it is initially treated as a lease lasting one year.
This can affect tax on rent and whether an SDLT return is required.
What this rule is about
Some arrangements continue until someone gives notice. They may be periodic tenancies, tenancies at will, or other rights that can end by notice.
No fixed term is written into them.
This creates an SDLT issue. Tax on lease rent normally depends on the length of the lease.
The law addresses that issue by assigning the arrangement an initial length of one year.
What the official source says
HMRC’s manual states that an indefinite lease is initially treated as a fixed one-year lease for SDLT. This applies even if another law treats the same lease as lasting for a different period.
That other treatment does not change the initial SDLT approach. The one-year starting point still applies.
- The starting SDLT term is one year.
- A rule outside SDLT that gives another term is ignored for this purpose.
- Rent may create an SDLT charge.
- A separate payment for the lease may also create an SDLT charge.
- If the lease continues after the first year, its SDLT treatment must be reconsidered.
For notification purposes, the legislation says that an indefinite lease is a lease of less than seven years, even though its duration is not stated.
What this means in practice
Do not assume that a lease without a stated end date avoids SDLT questions when it can continue, roll over, or end only after notice is given. Its form is not decisive.
Begin with a one-year term.
Readers who focus only on the tenancy wording can miss this point. The assumed term controls the initial SDLT analysis at the outset.
Check the substance.
According to HMRC’s manual, an initial return is required only where SDLT is payable on the rent, another payment, or both, under the initial analysis. This is useful guidance, but the legislation contains the full notification rules.
- Check the rent over the assumed first year.
- Check whether you are paying anything apart from rent.
- Use the notification rules for a lease of less than seven years.
- Keep the agreement and any later replacement agreement.
- Review the position if the arrangement runs past its first year.
How to analyse it
Start with the real agreement rather than its label. Calling it a licence, rolling tenancy, or temporary arrangement does not by itself determine the SDLT result where the underlying rights point elsewhere.
Look at the real agreement.
- Is there a lease or right over land?
- Does it have no fixed end date?
- Can it end after notice, or at any time?
- What is the rent during the first assumed year?
- Is there any premium or other payment?
- Does the statutory notification test require a return?
- Has the arrangement continued beyond the assumed year?
Example
Amir takes premises under an agreement that continues until either side gives notice. It has no fixed end date.
At the start, SDLT treats it as a one-year lease. Another rule might describe the agreement as having a different length, yet the initial SDLT treatment remains unchanged because SDLT begins from the assumed one-year term.
If Amir remains beyond that year, he must check the later rules rather than rely on the first calculation, even if the agreement’s wording and rent remain unchanged. The first calculation is not enough.
Why this can be difficult in practice
You might think that a rolling agreement has no term and therefore leaves nothing to calculate. SDLT does not begin that way.
The one-year assumption provides the term for the initial tax analysis.
The more difficult question is often factual: is this really an indefinite lease, and which payments count? The answer may lie in notice clauses, side letters, rent reviews, and payments made when the agreement began.
It may not be found in the tenancy wording alone. Examine all of them.
- A housing or property-law description may not decide SDLT.
- Rent is not the only payment worth checking.
- A lease continuing after one year needs a fresh SDLT review.
- HMRC guidance does not replace the statutory notification test.
Key takeaways
- An indefinite lease starts as a one-year lease for SDLT.
- Check both rent and any separate payment.
- Review the SDLT position if the lease carries on.
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 17A para 4 — how indefinite leases are treated for SDLT
- FA 2003 section 77 — which land transactions must be notified
- FA 2003 section 77A — exceptions from the SDLT notification requirement
- FA 2003 Schedule 5 para 2 — SDLT charged on rent under a lease
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 supplied statutory text is current only to 17 November 2025. The position for a transaction after that date needs checking against current legislation.
- Whether a particular arrangement is an indefinite lease can depend on its wording and on how it can end.
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 or tenancy agreement
- Any clause allowing either side to end the arrangement by notice
- The start date and whether the arrangement continued after one year
- Details of rent and any separate payment for the lease
- The date on which the SDLT position is being considered
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 an indefinite lease: the first-year rule [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 17A para 4 - how indefinite leases are treated for SDLT https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/4/2025-11-17 - FA 2003 section 77 - which land transactions must be notified https://www.legislation.gov.uk/ukpga/2003/14/section/77/2025-11-17 - FA 2003 section 77A - exceptions from the SDLT notification requirement https://www.legislation.gov.uk/ukpga/2003/14/section/77A/2025-11-17 - FA 2003 Schedule 5 para 2 - SDLT charged on rent under a lease https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm14050 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 supplied statutory text is current only to 17 November 2025. The position for a transaction after that date needs checking against current legislation. - Whether a particular arrangement is an indefinite lease can depend on its wording and on how it can end. 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 an indefinite lease: the first-year rule
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