Stamp duty when an indefinite lease carries on
In brief
SDLT treats an indefinite lease as a one-year lease at first. If it carries on, its assumed term grows by one year at a time, which can create extra SDLT on rent.
- Review the SDLT position at each anniversary.
- A seven-year assumed term does not alone make the lease notifiable.
- Check current filing rules because the manual’s directions may be outdated.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty when an indefinite lease carries on
An open-ended lease can trigger a fresh stamp duty check each year it continues. SDLT first treats it as a one-year lease. If it carries on, the assumed term becomes two years, then three, and so on.
What this rule is about
Some leases have no fixed finishing date. They may run from month to month, year to year, or until either side gives notice. You may know this as a periodic tenancy.
For stamp duty land tax, or SDLT, the law cannot simply ignore the missing end date. It uses a moving estimate instead. The assumed length grows only while the lease is still running.
Why does that matter? SDLT on rent uses the rent over the lease term. A longer assumed term can raise that figure, known as net present value or NPV.
What the official source says
According to HMRC’s manual, an indefinite lease starts as a one-year lease for SDLT; if it continues beyond that first year, HMRC treats it as a two-year lease from the date it began. That starting date remains fixed. A further year of continuation makes it a three-year lease, then a four-year lease, and so on.
- A periodic tenancy can fall within this rule.
- A tenancy that ends when notice is given can fall within this rule.
- A tenancy at will can also fall within this rule.
- The first assumed term is one year.
- Each completed further year adds one year to that assumed term.
- The process continues until the lease ends or a new lease is granted.
This is not a new lease signed every year. It is a way of working out SDLT on the lease that already exists.
What this means in practice
When rent is payable and the lease remains in force beyond an anniversary, the taxpayer must recalculate the NPV because the assumed term has grown by another year. The calculation looks further ahead. NPV is a tax calculation that gives less weight to rent due further in the future. Even so, adding another year’s rent can increase it.
That increase may mean extra SDLT. It may also mean that a return is needed where no tax was due at the start.
- Keep the original SDLT calculation, even if no tax was due.
- Check the lease on every anniversary while it continues.
- Recalculate the NPV using the longer assumed term.
- Compare the new result with the amount already reported and paid.
- Check whether the transaction has become notifiable.
- Pay any extra tax by the deadline that applies.
This is the part people miss: no SDLT in year one does not always mean no SDLT later.
How to analyse it
Start with the actual agreement, not the label used by the landlord or tenant. Even where a document calls itself a monthly tenancy, it may still require this SDLT treatment if it continues until notice is given and has no fixed ending date. Its label is not decisive.
- Read the lease and identify whether it has a fixed end date.
- Find the date the lease began.
- Work out whether it continued past the first assumed year.
- Identify each later anniversary it has passed.
- List the rent due in every year now included.
- Recalculate the NPV for the longer assumed term.
- Check whether tax is now due or has increased.
- Work out whether a return or further return is required.
- Check whether the lease has ended or been replaced by a new lease.
The law also has a special point on notification. An indefinite lease counts as a lease of less than seven years for the notification rules. It does not become notifiable simply because the assumed term has grown to seven years.
Whether a transaction is notifiable depends on the wider SDLT rules, on the amount on which tax is charged, and on how those rules apply to it. Both questions matter.
Example
Sam takes an open-ended shop lease on 1 April. The rent is £1,200 a month. For SDLT, it first counts as a one-year lease. If Sam is still renting the shop after 31 March the next year, it then counts as a two-year lease from 1 April.
The second year’s rent is now part of the NPV calculation. If that creates extra SDLT, Sam must deal with the later return rules. If the lease continues for a third year and the second year’s rent has already entered the calculation, Sam must make the same check again using a three-year assumed term. This time, the term is three years.
The example does not calculate tax because the applicable SDLT rates depend on the transaction’s effective date. The key point is the extra year of rent, not a new signature.
Why this can be difficult in practice
It is easy to focus on the day the lease started and forget what happened later. Yet the later anniversary may be the date that changes the SDLT position.
HMRC’s manual says that, where no SDLT was initially due but the longer term brings the NPV into charge, notification should be made using SDLT forms and a letter within 30 days. That is HMRC guidance, not legislation.
The current legislation is more detailed. It gives 14 days after the end of the assumed term if the transaction becomes notifiable. It gives 30 days for a further return where tax first becomes due, or increases, and the transaction does not become notifiable.
- Do not assume a lease is fixed-term because rent is paid monthly.
- Do not treat each anniversary as a newly signed lease.
- Do not assume the seven-year point alone creates a filing duty.
- Do not rely on an old filing method without checking HMRC’s live instructions.
- Do not use today’s tax rates if the lease began at an earlier date.
Key takeaways
- An indefinite lease starts as a one-year lease for most SDLT purposes.
- Each further year can increase the rent figure used for SDLT.
- Check the filing deadline under the current legislation, not only the manual.
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 — treating an indefinite lease as yearly fixed terms; later returns, tax calculation and payment deadlines; applying return rules when the deemed term extends; notification treatment and meaning of indefinite lease
- FA 2003 Schedule 5 para 3 — calculating rent net present value over a lease term
- FA 2003 section 77 — when a land transaction is notifiable
- FA 2003 section 77A — notification exception for shorter leases below zero rate
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 HMRC manual says to send forms and a letter to Stamp Taxes within 30 days. Its administrative filing directions should be checked against HMRC’s live process, especially where the current legislation instead requires a 14-day return.
- The correct result can depend on the lease wording, the rent due in each period, whether the arrangement has ended, and whether a new lease has been granted.
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 later agreement or notice
- The date the lease began and each anniversary date
- A record of rent paid or due for every year
- The original SDLT return and calculation, if one was filed
- Details of any replacement lease or formal extension
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 when an indefinite lease carries on [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 - treating an indefinite lease as yearly fixed terms https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/4/2025-11-17 - FA 2003 Schedule 17A para 4 - later returns, tax calculation and payment deadlines https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/4/2025-11-17 - FA 2003 Schedule 17A para 4 - applying return rules when the deemed term extends https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/4/2025-11-17 - FA 2003 Schedule 17A para 4 - notification treatment and meaning of indefinite lease https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/4/2025-11-17 - FA 2003 Schedule 5 para 3 - calculating rent net present value over a lease term https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 section 77 - when a land transaction is notifiable https://www.legislation.gov.uk/ukpga/2003/14/section/77/2025-11-17 - FA 2003 section 77A - notification exception for shorter leases below zero rate https://www.legislation.gov.uk/ukpga/2003/14/section/77A/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/sdltm14070 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 HMRC manual says to send forms and a letter to Stamp Taxes within 30 days. Its administrative filing directions should be checked against HMRC's live process, especially where the current legislation instead requires a 14-day return. - The correct result can depend on the lease wording, the rent due in each period, whether the arrangement has ended, and whether a new lease has been granted. 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 when an indefinite lease carries on
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