Stamp duty on an open-ended lease: the first-year rule
Open-ended leases and SDLT
An indefinite-term lease starts as a one-year lease for most SDLT purposes. The assumed term then increases each year it continues.
- This can affect the SDLT position over time.
- The supplied HMRC page is archived and concerns Scotland.
- Check the lease terms and current legislation.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on an open-ended lease: the first-year rule
For stamp duty land tax (SDLT), an open-ended lease is treated as a one-year lease at first. This applies for most tax purposes. If it continues, the assumed term grows by one year at a time. This can change the tax result.
What this rule is about
Some leases have no fixed end date. They can run from month to month. They can also continue until someone gives notice, or work as a tenancy at will.
The law needs a term to work out SDLT. It uses a rolling assumed term instead.
What the official source says
The HMRC page supplied is archived. It says that, from April 2015, SDLT no longer applies to land deals in Scotland. Scotland uses Land and Buildings Transaction Tax instead.
For England and Northern Ireland, the legislation sets the initial treatment:
- an open-ended lease starts as a fixed one-year lease
- if it continues, it then counts as a two-year lease
- after another year, it counts as a three-year lease
- the assumed term keeps increasing while the lease continues
What this means in practice
Do not assume that a lease with no end date is outside the SDLT rules. Its term can change over time. This can happen even if no one signs a new document.
- check the lease term at the start
- monitor whether the arrangement continues beyond each year
- keep records of rent and other payments
How to analyse it
Start with the document and the real arrangement. Look at how and when either side can end it.
- is there a fixed end date?
- can either side end it by giving notice?
- is it a periodic tenancy or tenancy at will?
- has it continued beyond the first assumed year?
Example
Maya takes an open-ended lease of a shop. At first, SDLT treats the lease as lasting one year. If Maya stays after that year, the law treats it as lasting two years. If she stays for a third year, it counts as a three-year lease.
Why this can be difficult in practice
People often focus on the label in the agreement. That is not enough. The rights to end the arrangement matter. What happens in real life matters too. These points can decide if this rule applies.
- a “monthly” arrangement may still be an open-ended lease
- the lease may continue without a fresh agreement
- different SDLT rules apply when testing tax-return requirements
Key takeaways
- An open-ended lease starts as a one-year lease for most SDLT purposes.
- The assumed term grows each year the lease continues.
- Check the current law for transactions after 17 November 2025.
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 4 — how indefinite-term leases are treated for SDLT
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 supplied HMRC page is archived and contains only a notice about Scotland, not a substantive explanation of the rule.
- The supplied statutory text records changes known to be in force only up to 17 November 2025. Check current legislation for a later transaction.
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 lease wording and start date
- whether either party can end the lease by notice
- whether the lease has continued beyond each anniversary
- the rent and any other amount paid under the 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 on an open-ended lease: the first-year rule [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 4 - how indefinite-term leases are treated for SDLT https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/4/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm18718 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 supplied HMRC page is archived and contains only a notice about Scotland, not a substantive explanation of the rule. - The supplied statutory text records changes known to be in force only up to 17 November 2025. Check current legislation for a later transaction. 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 on an open-ended lease: the first-year rule
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