Stamp duty overlap relief: HMRC’s replacement lease example
Overlap relief in brief
When an old lease is surrendered and replaced, the new lease rent may be reduced for the period both leases would otherwise cover.
- Use the old rent figure from the earlier SDLT calculation.
- Calculate any part-year overlap carefully.
- Do not rely on the historic example’s SDLT figures for a new transaction.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty overlap relief: HMRC’s replacement lease example
If you give up an old lease and receive a new one, you may pay less stamp duty on the new rent because the tax should not count rent for the same period twice. HMRC’s example shows how overlap relief works when the final overlap covers only part of a lease year and the rent must be split accordingly. That timing matters.
What this rule is about
Rent under a lease can attract stamp duty land tax. Net present value, or NPV, of that rent is used in the calculation. NPV turns future rent payments into one present-day figure.
A replacement lease can produce an awkward result when the old lease ends early, despite otherwise continuing for years. In that situation, both leases cover the same property during the remaining period.
Overlap relief avoids that duplication. For the shared period, it reduces the new-lease rent by the old-lease rent already used for stamp duty.
What the official source says
In an example from 2008, HMRC’s manual describes an old 25-year lease that began on 1 April 2004 and would have ended on 31 March 2029. Its annual rent was £144,000, producing an NPV of £2,373,337 and SDLT of £22,233 on the rent.
- On 1 October 2008, the old lease was surrendered.
- A new 150-year lease was granted on that date.
- Under the new lease, the annual rent was £175,000.
- From 1 October 2008 to 31 March 2029, the leases overlapped.
- That was 20 years and six months.
- For the comparison, the old rent was £144,000.
- The new lease had no variable-rent feature.
When periods overlap, the law reduces new rent by the rent that would have fallen due under the old lease for that shared period. For this purpose, use the old-rent figure from the earlier SDLT calculation. The reduction cannot create a negative rent figure.
What this means in practice
For the first 20 complete years of the new lease, the NPV calculation counts £31,000 of rent each year: it subtracts £144,000 from £175,000. That is the adjusted annual figure.
Year 21 requires a different approach because the overlap ends halfway through it. Subtracting a whole year would be wrong. Compare rent for the actual overlapping months, or days where necessary.
- For the first six months of year 21, new rent is £87,500.
- Old rent for those six months is £72,000.
- The reduced rent for that half-year is therefore £15,500.
- For the following six months, there is no overlap.
- The full new-lease rent for that period is £87,500.
- The rent used for year 21 is £103,000.
- From year 22 to year 150, the calculation uses £175,000 each year.
On HMRC’s figures, the new lease has an NPV of £2,889,750. The SDLT due on its rent is £27,397. HMRC provides those amounts as part of a historic example, so do not use them to calculate tax on a new lease today.
How to analyse it
Begin with the documents rather than the calculator. Ask whether the new lease falls within the statutory overlap rule. Describing a lease as a renewal does not settle that question.
- Identify the date the old lease would have ended.
- Identify the date the new lease was granted.
- Work out the exact shared period between those dates.
- Check why the old lease ended and the new one was granted.
- Check whether the premises are the same or substantially the same.
- Find the rent figure used for the old lease’s SDLT calculation.
- Subtract that old rent only for the overlap period.
- Split a year where the overlap begins or ends part way through it.
- Then calculate the NPV using the adjusted rent schedule.
Example
Imagine a lease year from 1 October to 30 September: in the example, year 21 runs from 1 October 2028 to 30 September 2029, and the old lease would have expired on 31 March 2029. Only the first six months overlap.
From October to March, £87,500 of new rent is reduced by £72,000 of old rent, while from April to September the old lease has ended and the full £87,500 is used. This leaves £15,500 for October to March. Add them together: the year 21 figure is £103,000.
Why this can be difficult in practice
People often get this wrong because the relief does not always work as a simple annual deduction. A shared period can end in the middle of a rent year. Timing must shape the calculation.
HMRC’s manual says its calculator will not handle this example. Instead, HMRC says people should calculate it manually. That is HMRC guidance rather than legislation, but it reflects the need for a tailored part-year calculation.
- Using the current old rent instead of the rent used in its SDLT calculation.
- Deducting old rent after the old lease’s original expiry date.
- Deducting a full year where only part of that year overlaps.
- Assuming the rule applies without checking the lease arrangements.
- Using historic tax figures or rates for a current transaction.
Key takeaways
- Overlap relief can prevent double counting of lease rent.
- The old SDLT rent figure is central to the calculation.
- A part-year overlap needs a part-year rent calculation.
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 is taxed under schedule 5
- FA 2003 Schedule 5 para 2 — tax is charged on lease rent
- FA 2003 Schedule 5 para 3 — how to calculate rent net present value
- FA 2003 Schedule 17A para 7 — rules for 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
- Whether premises are the same or substantially the same can depend on the lease documents and the facts.
- A calculator may not reproduce a part-year overlap correctly where rent must be split by month or day.
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 leases, including plans and grant dates.
- The surrender agreement and documents explaining why the new lease was granted.
- The old SDLT calculation showing the rent used for the old lease.
- A rent schedule covering the final part-year of 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 Stamp duty overlap relief: HMRC’s replacement lease example [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 is taxed under schedule 5 https://www.legislation.gov.uk/ukpga/2003/14/section/56/2025-11-17 - FA 2003 Schedule 5 para 2 - tax is charged on lease rent 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 net present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 Schedule 17A para 7 - rules for 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/sdltm16030 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 premises are the same or substantially the same can depend on the lease documents and the facts. - A calculator may not reproduce a part-year overlap correctly where rent must be split by month or day. 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: HMRC’s replacement lease example
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