Extending a lease: when stamp duty may apply
Lease extensions and SDLT
A lease extension can create a new lease for SDLT purposes. Where an old lease is replaced, qualifying overlap rules can reduce the rent used in the new calculation.
- Check the legal effect of the deed
- Identify any overlap with the old lease
- Keep the earlier SDLT calculation
Scroll down for the full analysis.
Read the original guidance here:
Extending a lease: when stamp duty may apply
Extending a lease can create a new lease for stamp duty land tax (SDLT). That can matter even where you call the document an extension.
Where the parties replace the old lease and the statutory same-party rule applies, you may need to calculate SDLT afresh on the new lease’s rent rather than treat surrender of the old lease as payment. Surrender is not payment.
What this rule is about
Parties can extend a lease in more than one way. Legal effect determines SDLT treatment.
A common concern is paying tax twice on the same rent. In specified replacement-lease cases, the overlap rule prevents that result.
What the official source says
HMRC’s manual identifies three ways to extend a lease. HMRC guidance is not law, but it explains how HMRC approaches these arrangements.
- A landlord may grant a reversionary lease. Its term starts after the grant date.
- An old lease may be expressly surrendered and replaced with a new one.
- A variation deed may extend the term and take effect as an implied surrender and regrant.
For an express surrender and regrant, or a variation treated that way, HMRC calculates SDLT using the new lease’s net present value. This is a discounted value of rent over the lease term.
- Granting the new lease starts the overlap period.
- It ends when the old lease would have ended without the surrender.
- During that period, the overlap rule reduces rent by rent already used for SDLT on the old lease.
What this means in practice
Although parties may call the document an extension, SDLT follows its legal effect, so you must decide whether it creates a new lease before assessing the new rent figures. Its title is not decisive.
If it does create a new lease, check the new rent figures. Where the statutory same-party rule applies, surrender of the old lease does not itself count as payment for the new lease.
- Keep the old SDLT return and calculation.
- Check whether the premises in both leases are the same or substantially the same.
- Compare the old lease’s original end date with the new lease’s grant date.
How to analyse it
Begin with the legal documents. A label such as “extension” is not enough. Work through the facts in order.
- Is this a future-starting reversionary lease, a surrender and regrant, or a variation?
- Does the variation take effect as the grant of a new lease?
- What rent is due under the new lease over its full term?
- Is there an overlap with the old lease’s remaining term?
- What rent did the earlier SDLT calculation use?
- Does the statutory overlap rule apply to these leases and parties?
Example
Sam gives up an old lease that would otherwise run for another two years. A new lease of the same shop is granted to Sam by the landlord on the same day.
Rent under the new lease is £14,000 a year. If the old SDLT calculation used £10,000 a year from the old lease, the overlap rule treats the new lease rent for those two years as £4,000 a year. A net present value calculation is still needed for the full new lease.
Why this can be difficult in practice
Its real legal effect in the paperwork decides the issue. A small drafting change can alter the answer. So can a change to the premises, the parties or the rent.
- A future-starting lease is not the same arrangement as a replacement lease.
- The overlap rule has conditions and does not apply just because two leases cover similar dates.
- Any reduction is limited: it cannot turn the new lease rent into a negative figure.
- Old SDLT records may be needed to prove the rent already taken into account.
Key takeaways
- A lease extension may create a new SDLT event.
- What the deed does matters more than its title.
- Rent already used for SDLT may reduce rent in a qualifying overlap period.
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 43 — when a lease variation counts as a land transaction
- FA 2003 Schedule 5 para 2 — how tax on lease rent is calculated
- FA 2003 Schedule 5 para 3 — how the rent net present value is worked out
- FA 2003 Schedule 17A para 9 — rent reduction for an overlap between replacement leases
- FA 2003 Schedule 17A para 16 — treatment of a surrendered lease when another is granted
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
- Whether a particular deed of variation takes effect in law as a surrender and regrant depends on the lease terms and drafting.
- The supplied statutory text is current only to 17 November 2025. Current-law status must be checked for a transaction after that date.
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 old lease and every extension, variation or surrender document
- The date each document took effect
- The old and new lease terms and the premises covered
- The rent due under each lease during any overlap
- The SDLT return and rent figures used for the old lease
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 Extending a lease: when stamp duty may apply [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 43 - when a lease variation counts as a land transaction https://www.legislation.gov.uk/ukpga/2003/14/section/43/2025-11-17 - FA 2003 Schedule 5 para 2 - how tax on lease rent is calculated https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 3 - how the rent net present value is worked out https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 Schedule 17A para 9 - rent reduction for an overlap between replacement leases https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/9/2025-11-17 - FA 2003 Schedule 17A para 16 - treatment of a surrendered lease when another is granted https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/16/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm14120 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 - Whether a particular deed of variation takes effect in law as a surrender and regrant depends on the lease terms and drafting. - The supplied statutory text is current only to 17 November 2025. Current-law status must be checked for a transaction after that date. 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: Extending a lease: when stamp duty may apply
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