Stamp Duty Land Tax: Abnormal Rent Increases Example and Scottish Tax Update

SDLT and abnormal rent increases on leases

SDLT on a lease can depend on the rent payable across the whole term, not just the starting rent. If the lease includes an unusual later increase in rent, the SDLT calculation may need special treatment, so the full rent schedule and the legislation should be checked carefully.

• SDLT on lease rent is based on the net present value of the rent over the term, so the timing and pattern of rent changes matter.
• An abnormal rent increase may arise where rent starts low and then rises sharply, especially if that increase is built into the lease from the outset.
• Rent-free periods, reduced initial rent, deferred rental value, or increases that do not follow an ordinary commercial review pattern may need closer analysis.
• If the abnormal increase rule applies, the SDLT due may be higher than expected from looking only at the early years of the lease.
• The HMRC source mentioned here is only an archived page title and does not contain the actual worked example, so the legal position must be checked against the legislation and fuller guidance.

Scroll down for the full analysis.

SDLT and abnormal rent increases: example and practical effect

This page is about a very specific SDLT issue: how tax on lease rent can be affected if the rent rises in an unusual way during the term of the lease. The source material here is extremely brief and appears to be an archived SDLT manual page for an example. Even so, the underlying point matters because SDLT on leases is not always based only on the rent payable at the start. Where rent increases are abnormal, the tax calculation may need closer attention.

What this rule is about

For SDLT on the grant of a lease, one part of the charge can be based on the net present value of the rent payable over the lease term. That means the pattern of rent over time matters. A lease with stepped rent, reviews, concessions, or unusual increases may produce a different SDLT result from a lease with a stable commercial rent pattern.

The reference to “abnormal rent increases” points to a rule aimed at rent changes that are not treated as ordinary for SDLT purposes. In broad terms, the issue is whether a later increase in rent should be brought into the tax calculation in a special way rather than simply treated as part of the normal expected rent pattern.

What the official source says

The supplied source is only the title of an archived HMRC manual page: “SDLTM18625 – Calculation of stamp duty land tax: Rent: Abnormal rent increases: Example”. It does not include the substantive text of the example itself.

From the title alone, the official material appears to have been intended to illustrate how the SDLT rent calculation works where there is an abnormal rent increase. The page is also marked as archived and notes that, from April 2015, SDLT no longer applies to land transactions in Scotland, which are instead within LBTT. That archival note is about territorial scope, not the underlying SDLT concept for England and Northern Ireland.

What this means in practice

If a lease contains an unusual increase in rent, you should not assume that SDLT can be worked out by looking only at the initial rent or by applying a simple stepped-rent approach without checking the detailed rules.

In practice, the key consequence is this: the rent profile over the lease term may need to be analysed carefully to decide whether an increase is “abnormal” for SDLT purposes and, if so, how that affects the tax calculation.

This matters most where:

• the lease starts with a low rent and then jumps sharply later;
• there is a rent-free or reduced-rent period followed by a significant increase;
• the rent structure appears designed to defer rental value into later years; or
• the pattern of increases does not look like an ordinary commercial review pattern.

Where the rent increase is caught by the relevant rule, the SDLT result may be higher than a taxpayer expected if they had looked only at the early years of the lease.

How to analyse it

A sensible way to approach this issue is:

• Identify the full rent schedule over the whole lease term.
• Check when increases occur and how large they are.
• Ask whether the increases look like ordinary commercial rent progression or something more unusual.
• Consider whether the increase is built into the lease from the start, rather than arising from a later genuine market review.
• Work out whether the SDLT rent calculation needs to reflect a special rule for abnormal increases rather than a straightforward net present value computation.
• Keep in mind that the manual is guidance, while the legal answer depends on the legislation.

For conveyancers and advisers, the practical question is often whether the lease terms create a tax result that differs from the commercial impression of the deal. A low initial rent can be misleading if the lease contains a substantial later uplift.

Example

Illustration: a tenant takes a long lease. For the first few years, the rent is set at a modest level. After that, the rent rises sharply to a much higher fixed amount under terms already written into the lease. A person reviewing only the first part of the term might underestimate the SDLT position. The correct approach is to examine the whole rent structure and then apply the SDLT rules for lease rent, including any rule dealing with abnormal increases.

This example is illustrative only. The supplied source does not include the actual figures or worked calculation from HMRC’s archived example page.

Why this can be difficult in practice

The difficulty is that the supplied source does not contain the actual example or the detailed wording of the rule. That means the exact legislative test and computational treatment cannot safely be reconstructed from this page alone.

Even where the law is available, these cases can still be fact-sensitive. A stepped rent can arise for ordinary commercial reasons, such as incentives, fit-out periods, or agreed review mechanics. But in some cases the pattern may be treated as abnormal for SDLT purposes. The distinction depends on the detailed statutory rule and the lease wording.

Another practical difficulty is that manual examples are explanatory tools, not legislation. They help show HMRC’s view of how the rule applies, but the legal position comes from the statute itself.

Key takeaways

• SDLT on leases can depend on the full rent profile, not just the starting rent.
• An unusual later increase in rent may require special treatment under the SDLT rules.
• The archived source supplied here is only a page title, so the actual example and detailed rule need to be checked in the legislation or fuller HMRC material.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Stamp Duty Land Tax: Abnormal Rent Increases Example and Scottish Tax Update

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