Stamp duty on an indefinite lease that keeps running
Indefinite leases and SDLT
An indefinite lease is treated as a one-year lease at first. Each time it continues, SDLT treats it as having a longer fixed term.
- Continuation can create a return duty or extra tax.
- First-time reporting has a 14-day deadline.
- Extra tax on an earlier return has a 30-day deadline.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on an indefinite lease that keeps running
An open-ended lease can trigger a fresh stamp duty check each time it carries on. SDLT first treats it as a one-year lease.
If the lease continues after that year, SDLT treats it as a two-year lease instead. That can mean more tax, a further return, or both.
What this rule is about
Some leases do not state a final date. They may operate month to month, continue until notice ends them, or exist as a tenancy at will. For SDLT, these are leases for an indefinite term.
The law needs a term to work out the tax position. In practice, the answer is to treat it as lasting one year at first, adding another year whenever it continues.
The original grant does not become a new lease each year. Its SDLT treatment changes.
What the official source says
Under the legislation, an indefinite lease is initially treated as a fixed one-year lease. If it continues beyond that point, the legislation counts it as a two-year lease. A further year of continuation makes it a three-year lease, and the pattern continues.
- A periodic tenancy can be an indefinite lease.
- A tenancy at will can also be an indefinite lease.
- A right that either side can end by notice may fall within the rule.
- For deciding whether a return is needed, the lease counts as being for less than seven years.
Where continuation first makes the transaction one that needs an SDLT return, you must file the return and pay any tax due within 14 days after the end of that latest period.
When continuation creates tax or extra tax in a transaction you already reported, you must make a further return within 30 days after that period ends.
Calculate the tax by reference to the original effective date. That date can affect the calculation.
What this means in practice
You cannot safely treat the first SDLT result as final just because the lease has no fixed end date. Each anniversary may change the assumed length of the lease.
Most people miss this because the parties have signed nothing new.
When an earlier return has been made and a later return is needed, HMRC’s manual says to write to the Stamp Office. This is HMRC’s administrative guidance, not the wording of the law.
- Keep the unique transaction reference number from the original return.
- Recalculate the SDLT position for the longer assumed term.
- Give HMRC the new calculation and your assessment of the tax due.
- Pay any tax by the deadline for that later return.
If you did not need an original return, the position can still change later. Continuation may bring the lease into the return system for the first time.
HMRC says you should send an SDLT1 to the Stamp Office with a covering letter.
How to analyse it
Start with the lease, not the label used by the landlord or tenant. What actually decides the issue?
Ask whether the lease has a fixed end date and whether it continues beyond each assumed year.
- Read the lease and any later agreement carefully.
- Check whether it is periodic, at will, or ends only on notice.
- Find the original effective date for SDLT.
- Identify the first one-year assumed term and each later anniversary.
- Work out whether the longer assumed term changes the tax result.
- Check whether the continuation makes the lease reportable for the first time.
- Use the 14-day or 30-day deadline that applies to that outcome.
Do not assume that a lease below the reporting threshold at the start will stay there. Equally, a lease continuing into a second year does not automatically mean tax is due.
The recalculation decides that.
Example
On 1 June, Amir takes a shop under a monthly tenancy that either side can end by notice. There is no stated final date.
SDLT initially treats it as a one-year lease. It continues after 31 May the following year, so SDLT then treats it as a two-year lease.
Amir must recalculate the SDLT position using the original effective date. If, after Amir recalculates by using the original effective date, the new assumed two-year term first requires a return, he must submit it within 14 days after 31 May.
That is the deadline.
If Amir has already made a return and extra tax now arises, he must make a further return within 30 days after 31 May.
Why this can be difficult in practice
The awkward part is often identifying the arrangement you have. A document may use informal language, while later emails or conduct show that the occupation changed.
Small drafting details can matter.
You might think the annual check always falls on a calendar year-end. It does not.
The key point is the end of the assumed term that started with the original lease.
- An informal extension may need checking alongside the original lease.
- Rent changes can affect the recalculation.
- A premium or connected deal may also affect the SDLT result.
- The deadline differs between first-time reporting and extra tax on an earlier return.
Key takeaways
- An indefinite lease starts as a one-year lease for SDLT.
- Each year it continues can require a fresh SDLT calculation.
- Check the deadline promptly when the assumed term increases.
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 — treatment and later returns for indefinite leases
- FA 2003 section 77 — when a land transaction needs an SDLT return
- FA 2003 section 77A — exceptions from SDLT return requirements for major interests
- FA 2003 Schedule 10 — rules for SDLT returns enquiries assessments and appeals
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 correct result can depend on the lease terms, the rent, any premium, linked transactions and the SDLT rules in force on the original effective date.
- The supplied legislation is current only to 17 November 2025. Current law should be checked for a continuation after that date.
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 signed lease and any agreement showing how either side can end it
- The original SDLT return reference, if a return was filed
- The original effective date and each date the lease continued
- Rent, premium and other payment details used in the SDLT calculation
- Details of any linked property transactions
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 indefinite lease that keeps running [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 - treatment and later returns for indefinite leases https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/4/2025-11-17 - FA 2003 section 77 - when a land transaction needs an SDLT return https://www.legislation.gov.uk/ukpga/2003/14/section/77/2025-11-17 - FA 2003 section 77A - exceptions from SDLT return requirements for major interests https://www.legislation.gov.uk/ukpga/2003/14/section/77A/2025-11-17 - FA 2003 Schedule 10 - rules for SDLT returns enquiries assessments and appeals https://www.legislation.gov.uk/ukpga/2003/14/schedule/10/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm50550 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 correct result can depend on the lease terms, the rent, any premium, linked transactions and the SDLT rules in force on the original effective date. - The supplied legislation is current only to 17 November 2025. Current law should be checked for a continuation after that date. 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 indefinite lease that keeps running
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