SDLT overlap relief: stamp duty on a replacement lease
SDLT overlap relief in brief
When a lease is replaced before the old term would have ended, the rent used for SDLT on the new lease may be reduced for the shared period.
- In HMRC’s example, £110,000 new rent becomes £0 for 11 overlap years.
- The old rent was £144,000 and had already been used for SDLT.
- The source does not provide the final tax calculation for the new lease.
Scroll down for the full analysis.
Read the original guidance here:
SDLT overlap relief: stamp duty on a replacement lease
When an old lease ends early and the tenant receives a replacement, SDLT may not be charged twice on rent covering the same period. HMRC’s example shows that overlap relief can reduce the rent used in the new calculation to nil. That can make a major difference.
What this rule is about
SDLT can be due on rent under a lease, as well as on any upfront price. For the rent charge, its net present value, usually called NPV, is used in the calculation.
Rather than simply adding every annual payment together, the calculation discounts future rent.
An overlap can arise when a tenant gives up an existing lease and receives a new one before the old term would have ended. Without a reduction, both leases could include rent for the same years.
To prevent that result, the law reduces the new lease rent for the shared period. It also ensures that the resulting rent figure cannot fall below zero.
People often call this overlap relief. Despite the name, it is a calculation rule for rent.
What the official source says
In an example given by HMRC, a lease granted on 1 April 2004 ran for 25 years, so its stated expiry was 31 March 2029. Its annual rent was £144,000, its NPV was £2,373,337, and the SDLT on that rent was £22,233.
On 1 April 2018, the tenant surrendered the old lease and received a new 150-year lease. Under the new lease, the annual rent was £110,000.
According to HMRC, the overlap runs for 11 years, from 1 April 2018 to 31 March 2029.
- The old lease rent was £144,000 a year.
- The new lease rent was £110,000 a year.
- The old rent was already included in the first SDLT calculation.
- For years 1 to 11 of the new lease, HMRC uses rent of £0.
- For years 12 to 150, HMRC uses rent of £110,000 a year.
- HMRC says the new lease does not have variable rent.
Why nil rent? Each year, the old rent exceeds the new rent by £34,000. Under the overlap rule, the old rent reduces the new rent without permitting a negative rent figure.
As a result, the rent is nil.
HMRC says its calculator will not deal with this pattern. It says the NPV calculation must therefore be done manually.
This is HMRC’s view in this worked example, rather than a general statement about every current calculator.
What this means in practice
Apply the overlap reduction for each relevant period before calculating NPV. Only the rent left after that reduction must then be used in the NPV calculation.
Using the full new annual rent throughout is not permitted. That is the key point.
Where the statutory overlap rule applies, do not put the full new annual rent into every year of the NPV calculation.
You might assume that lower new rent means a smaller reduction. Here, it means no rent at all for the overlap years.
As the old rent is larger than the new rent, it absorbs the whole £110,000.
- Identify the date the replacement lease starts.
- Find the date the old lease would have ended.
- Count the period between those dates.
- Check the rent used for the old lease’s SDLT calculation.
- Compare it with the new lease rent for each overlap period.
- Never reduce the new rent below zero.
How to analyse it
Start with the leases, not the tax calculator. Conditions apply to the overlap rule.
In the usual surrender-and-regrant case, the tenant must surrender the old lease and receive the new lease in return, over the same or substantially the same premises.
What actually decides the overlap period? It is not decided by the surrender date for the old lease.
Instead, the period runs from the grant of the new lease until the old lease would have expired.
- Read the old lease term and its original expiry date.
- Confirm when the new lease was granted.
- Check whether the statutory connection between the leases exists.
- Map the overlap years or parts of years.
- Use the old rent taken into account for the original SDLT calculation.
- Reduce the new rent for each overlap period.
- Use the resulting rent figures in the NPV calculation.
- Check whether the new rent is variable or uncertain.
Variable rent needs separate care. Finance Act 2003 has special rules for rent that changes under the lease, or is contingent, uncertain or not yet known.
HMRC says those rules are not relevant to its fixed-rent example.
Example
Here is HMRC’s illustration. A 25-year lease began on 1 April 2004 and would end on 31 March 2029.
Annual rent is £144,000. For that old lease, the SDLT calculation included an NPV of £2,373,337 and tax of £22,233.
When, on 1 April 2018, the tenant gives up that lease and receives a 150-year replacement lease at £110,000 a year, the old rent remains higher for the 11 years ending on 31 March 2029.
That is the overlap period.
For years 1 to 11 of the new lease, HMRC’s calculation therefore uses £0 rent. It then uses £110,000 a year for years 12 to 150.
HMRC’s source does not provide the final NPV or SDLT due on the new lease.
Why this can be difficult in practice
Lease paperwork can make an apparently straightforward calculation much harder. Dates may not line up neatly.
Rent may change during a year, and the terms may describe premises differently after redevelopment or a reorganisation.
For the overlap calculation, use the rent actually included in the old SDLT calculation. This remains so even where a later summary presents a different headline annual rent.
That distinction matters. A later summary’s headline annual rent is not necessarily the relevant amount.
- Calling a document a replacement lease does not settle the statutory test.
- The premises must be checked against the statutory wording.
- A lower new rent can produce nil rent during overlap.
- The calculation cannot use a negative annual rent.
- Variable or uncertain rent may require different treatment.
- The source itself does not show the completed manual calculation.
Key takeaways
- SDLT overlap relief can remove new lease rent for shared years.
- The overlap ends when the old lease would have expired.
- HMRC’s example uses nil rent for 11 years, not a negative figure.
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 5 para 2 — SDLT calculation on rent paid under leases
- FA 2003 Schedule 5 para 3 — net present value calculation for lease rent
- FA 2003 Schedule 17A para 7 — treatment of variable or uncertain lease rent
- FA 2003 Schedule 17A para 9 — rent reduction where replacement lease terms overlap
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 source does not state whether the example’s premises are the same or substantially the same, although that is relevant to the statutory overlap rule.
- The source does not show the manual calculation or its final tax result.
- A different result may follow where the replacement lease has variable, contingent or uncertain rent.
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 and new lease documents
- The surrender and replacement lease dates
- Details showing the premises covered by each lease
- The rent schedule for each lease
- The rent figure used in the old SDLT calculation
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 SDLT overlap relief: stamp duty 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 5 para 2 - SDLT calculation on rent paid under leases https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 3 - net present value calculation for lease rent https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 Schedule 17A para 7 - treatment of variable or uncertain lease rent https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/7/2025-11-17 - FA 2003 Schedule 17A para 9 - rent reduction where replacement lease terms overlap https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/9/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm16015 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 source does not state whether the example's premises are the same or substantially the same, although that is relevant to the statutory overlap rule. - The source does not show the manual calculation or its final tax result. - A different result may follow where the replacement lease has variable, contingent or uncertain rent. 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: SDLT overlap relief: stamp duty on a replacement lease
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