Stamp duty overlap relief when an old lease is replaced
Overlap relief in brief
When an old lease is surrendered and replaced, SDLT can reduce the new lease rent for the time both leases would otherwise cover.
- The overlap ends on the old lease’s original expiry date.
- The calculation cannot produce negative rent.
- Part-year overlaps need a separate time-based calculation.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty overlap relief when an old lease is replaced
When you replace an unexpired lease, stamp duty land tax can reduce part of the new rent. This rule stops the calculation from counting the same period twice. HMRC’s example shows why a part-year overlap needs particular care.
What this rule is about
Lease SDLT on rent uses its net present value, often called NPV. In simple terms, NPV is a tax calculation that gives less weight to rent falling due further into the future, because it discounts those later payments. Later rent counts less.
A problem can arise when an old lease ends early, a longer new lease begins immediately, and both leases would otherwise include rent for the time remaining on the old lease. That creates duplication.
Overlap relief deals with that duplication. It changes the rent figure used for the new lease’s SDLT calculation during the overlap period.
What the official source says
The law applies where a tenant surrenders an old lease and the landlord grants that same tenant a new lease of the same, or substantially the same, premises in return. It also covers some other listed replacement-lease situations.
For the overlap period, subtract the old lease rent used in the earlier SDLT calculation from the new lease rent. Consequently, the result cannot fall below nil.
- The overlap begins when the new lease is granted.
- It ends when the old lease would have ended.
- Use the old rent figure that calculated SDLT on the old lease.
- It is not automatically the rent that happened to be due on that date.
- Use a nil figure where the old amount equals or exceeds the new amount.
HMRC says its example does not use the variable-rent rule because the new lease has fixed rent, although that rule can apply where rent varies, is uncertain, or is not yet known. The distinction matters.
A different calculation method can then apply.
What this means in practice
The relief does not cancel the new lease rent altogether. It only adjusts rent for the period in which the old and new leases overlap. Rent after that point remains in the calculation.
That distinction sounds narrow. Over a long lease, it can materially change the NPV and the SDLT due on rent.
- Check whether the old lease was actually surrendered.
- Compare the premises covered by both leases.
- Work out the old lease’s original end date.
- Find the rent amount used on the old SDLT calculation.
- Separate any part-year overlap with care.
If your conveyancer has treated the whole new rent as taxable even though an unexpired old lease was surrendered and replaced at once, check this fact pattern carefully. It may matter.
A replacement lease can need a more detailed rent schedule than an ordinary new lease.
How to analyse it
Start with the documents, rather than the label given to the deal. Calling a lease a renewal does not itself show that the statutory conditions are met.
- Identify the date the new lease was granted.
- Identify when the old lease would have expired without surrender.
- Measure the overlap between those two dates.
- Confirm that the relevant premises are the same or substantially the same.
- Use the old rent figure included in its SDLT calculation.
- Subtract that figure from new rent during the overlap.
- Use nil, rather than a minus figure, where the subtraction goes below zero.
- Use the resulting yearly rent figures in the NPV calculation.
Where only part of a year falls within the overlap, compare rent for the relevant months or days, taking account of exactly when the overlap begins and ends. Split the year.
Do not treat the whole year as overlapping merely because it begins during the overlap.
Example
HMRC’s example begins with a 25-year old lease granted on 1 April 2004. It would have expired on 31 March 2029. Its annual rent was £144,000, its NPV was £2,373,337, and SDLT on its rent was £22,233.
On 1 October 2018, that lease is surrendered and a 150-year new lease is granted. Under the new lease, the annual rent is £110,000. Accordingly, the overlap runs from 1 October 2018 to 31 March 2029: ten years and six months.
For years 1 to 10 of the new lease, £144,000 exceeds £110,000. Accordingly, the rent included in the NPV calculation is £0 for each of those years. It cannot be negative.
Year 11 is split in half. The first six months still overlap, so they produce £0. The next six months do not overlap, so £55,000 is included. From years 12 to 150, the figure is the full annual rent of £110,000.
Why this can be difficult in practice
The hard part is usually not the broad idea. It is identifying the correct old rent figure and matching the dates precisely. A six-month period can change an annual figure by £55,000 in HMRC’s example.
- The old lease may have contained rent changes or incentives.
- The amount used in its SDLT calculation may differ from later rent demands.
- The premises may have changed between the two leases.
- The overlap can end part way through a lease year.
- HMRC says its calculator will not perform this particular calculation.
- The manual’s final reference to year 21 appears inconsistent with its earlier reference to year 11.
That last point is worth recording. The example’s sequence clearly gives £55,000 for year 11, but the manual’s final wording should not be copied without checking the calculation.
Key takeaways
- Overlap relief prevents rent being counted twice for the same period.
- The old SDLT rent figure, not simply current rent, is the comparison figure.
- A partial overlap year must be split on a time basis.
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 56 — rent calculations are governed by schedule 5
- FA 2003 Schedule 5 para 2 — tax on rent uses its net present value
- FA 2003 Schedule 5 para 3 — how to calculate rent’s net present value
- FA 2003 Schedule 17A para 7 — treatment of variable or uncertain lease rent
- FA 2003 Schedule 17A para 9 — rent reduction for overlapping replacement leases
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 final sentence of the supplied HMRC text refers to ‘year 21’ when describing the £55,000 figure. The surrounding text says that figure is for year 11, and the stated sequence of years supports year 11. HMRC should correct or confirm this drafting point.
- HMRC says its calculator will not cope with this example. That is a statement about the calculator used when the manual was written, not a verified statement about any current online tool.
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, including their dates, terms, premises and rent clauses.
- The surrender document and evidence that the new lease was granted in return for it.
- The SDLT calculation or return for the old lease, showing the rent figure used.
- A month-by-month or day-by-day schedule for any partial overlap year.
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 overlap relief when an old lease is replaced [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 56 - rent calculations are governed by schedule 5 https://www.legislation.gov.uk/ukpga/2003/14/section/56/2025-11-17 - FA 2003 Schedule 5 para 2 - tax on rent uses its net present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 3 - how to calculate rent's net present value 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 for overlapping replacement leases 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/sdltm16025 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 final sentence of the supplied HMRC text refers to 'year 21' when describing the £55,000 figure. The surrounding text says that figure is for year 11, and the stated sequence of years supports year 11. HMRC should correct or confirm this drafting point. - HMRC says its calculator will not cope with this example. That is a statement about the calculator used when the manual was written, not a verified statement about any current online tool. 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 overlap relief when an old lease is replaced
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