Overlap relief: which rent counts for SDLT on a replacement lease?
In brief
Overlap relief can reduce the rent counted for SDLT when a new lease replaces an old one before its term ends.
- The overlap is the period both leases would cover.
- HMRC says an unchanged rent rise after year five may still count.
- Check the agreement, final lease and any variations carefully.
Scroll down for the full analysis.
Read the original guidance here:
Overlap relief: which rent counts for SDLT on a replacement lease?
Overlap relief: which rent counts for SDLT on a replacement lease?
When one business lease ends and another takes its place, stamp duty may not be payable twice on rent for the same period. This is known as overlap relief.
People often ask a simple but difficult question: which rent from the old lease counts?
What this rule is about
SDLT rules calculate lease rent by using its net present value, usually called NPV. This puts future rent into a single value for tax purposes.
A new lease may cover time that remained under an old lease. Without a special rule, the SDLT calculation could count rent for that shared period again. Overlap relief prevents that outcome.
The law reduces the rent under the new lease for the overlap period. The reduction equals the rent that would have been due under the old lease.
What the official source says
The legislation identifies the old rent as the amount the taxpayer took into account when working out SDLT on the old lease. HMRC’s manual considers what that phrase means where the parties substantially performed an agreement for lease before granting the final lease.
For rent after the first five years, the SDLT calculation does not simply apply a later increase. It generally uses the highest annual rent in the first five years.
That approach can lead readers to conclude that a year-six increase did not count at all.
- HMRC accepts that the unchanged lease terms still included this later increase.
- In the manual’s example, that view applies when the parties grant the final lease nine months after substantial performance, with the rent terms remaining unchanged throughout that interval. That timing matters.
- On those facts, HMRC says the parties need pay no extra SDLT when they grant the lease.
- The answer may differ if the parties varied the agreement or lease before grant.
- The overlap rule cannot create negative rent for SDLT purposes.
What this means in practice
When assessing overlap relief, do not look only at the figures used in the first NPV calculation. You must also read the rent terms that existed when the lease agreement was substantially performed.
Those terms matter.
This is the point people can miss. A rent rise after year five may not affect the first calculation, but HMRC says it can still matter when overlap relief is worked out later.
- Compare the signed agreement with the final lease.
- Check whether the later rent rise was in the original terms.
- Check whether either party changed the rent, term or premises.
- Identify the dates when the old and new leases run at the same time.
- Keep the earlier SDLT calculation and return with the lease papers.
How to analyse it
Begin with the documents and dates. The label given to a payment or lease change does not settle the issue. What matters is what the parties actually agreed, and when.
- Was the old lease surrendered? Did a new lease replace it on the same or substantially the same premises?
- When was the new lease granted?
- When would the old lease have ended if it had not been surrendered?
- That period between the two dates is the overlap period.
- Did the parties substantially perform an agreement for the new lease before they granted the final lease?
- What rent did the parties set out in that agreement, including any rise after year five?
- Did the terms remain unchanged before the final lease was granted?
- Use the relevant old rent to reduce the new lease rent during the overlap period.
Example
Imagine that an agreement for a lease sets rent at £200,000 a year for the first five years and £260,000 a year from year six. Once the parties substantially perform the agreement, SDLT is first calculated using the rent rules that apply at that point.
The parties grant the final lease nine months later, with no change to its terms. The original terms govern.
The £260,000 rise starts after year five. The first NPV calculation did not use it as the actual year-six figure.
Even so, HMRC’s manual says it was taken into account for overlap relief because it was already in the unchanged agreement. On that view, the final grant does not create additional SDLT.
Change one fact and proceed carefully. If the parties agree the £260,000 figure only after substantial performance, rather than including it in the agreement that was substantially performed, the manual’s stated conclusion does not answer the case.
Different facts matter.
Why this can be difficult in practice
Lease transactions can involve several documents, side letters and late amendments. Late amendments can matter. Even a small change can matter if it alters the rent terms relied on in the earlier SDLT position.
HMRC’s manual gives its view of the phrase “taken into account”. It is useful guidance, but it is not legislation. The statutory wording remains the starting point.
- People may confuse rent used in an NPV calculation with rent taken into account for overlap relief.
- A later rent increase is not automatically excluded from overlap relief.
- A rent rise already written into unchanged terms is different from a later negotiated increase.
- Replacing two leases with one lease also needs careful work on the shared periods.
- The source example uses commercial office leases; it does not provide a general answer for every lease arrangement.
Key takeaways
- Overlap relief stops the same lease period being counted twice.
- Read the original rent terms, not just the first SDLT calculation.
- HMRC says an unchanged year-six increase can still count for overlap relief.
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 7 — how changing rent is treated after five years
- FA 2003 Schedule 17A para 9 — rent reduction where an old lease overlaps
- FA 2003 Schedule 17A para 12A — treatment of a substantially performed lease agreement
- FA 2003 section 44 — when a contract has been substantially performed
- FA 2003 Schedule 5 para 2 — tax calculation using the net present value of rent
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 later alteration is a change to the lease terms for this purpose depends on the lease documents and the facts.
- The source does not explain how much change is needed before HMRC would no longer apply its stated view.
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 agreement for lease and the final lease
- Evidence of the date of substantial performance
- The old lease, surrender documents and new lease
- A rent schedule covering each year of both leases
- Details of any changes made before the final lease was granted
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 Overlap relief: which rent counts for SDLT on a replacement lease? [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 7 - how changing rent is treated after five years https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/7/2025-11-17 - FA 2003 Schedule 17A para 9 - rent reduction where an old lease overlaps https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/9/2025-11-17 - FA 2003 Schedule 17A para 12A - treatment of a substantially performed lease agreement https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/12A/2025-11-17 - FA 2003 section 44 - when a contract has been substantially performed https://www.legislation.gov.uk/ukpga/2003/14/section/44/2025-11-17 - FA 2003 Schedule 5 para 2 - tax calculation using the net present value of rent 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/sdltm16011 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 later alteration is a change to the lease terms for this purpose depends on the lease documents and the facts. - The source does not explain how much change is needed before HMRC would no longer apply its stated view. 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: Overlap relief: which rent counts for SDLT on a replacement lease?
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