Stamp duty on a lease when market rent is set later
Later market rent can change SDLT
Where rent is unknown when a lease begins, a reasonable estimate is used first. When the actual figure is agreed, the SDLT calculation may need to be redone.
- Keep evidence supporting the original estimate.
- Record when the final rent was agreed.
- Check promptly whether extra SDLT is due.
Scroll down for the full analysis.
Read the original guidance here:
Stamp duty on a lease when market rent is set later
If your lease says that rent will later be set at market value and the amount is not known when the lease starts, you cannot simply leave it out of the stamp duty calculation. Use a reasonable estimate first. Once the parties agree the real figure, you may need to change the SDLT calculation.
What this rule is about
Stamp duty on lease rent uses the rent’s net present value. It discounts rent across the lease term. It is not simply the total of every payment.
A market-rent review can create a problem at the start. You know there will be rent, but not its amount. The law deals with this by allowing a reasonable estimate.
What the official source says
HMRC’s example covers a five-year lease. It was granted on 1 January 2021. Under the lease, rent is £150,000 a year for years one and two, but the market rent applies for years three to five. No one knew the market rent for years three to five when the lease began.
- No one knew the market rent for years three to five when the lease began.
- HMRC says you should first use a reasonable estimate of £160,000 a year.
- The taxpayer submitted the SDLT return on 15 January 2021.
- After the parties concluded the rent review on 1 July 2023, they set rent at £165,000 a year for years three to five, replacing the estimate used first.
- HMRC says you must then recalculate the net present value using the actual figures.
What this means in practice
The estimate is not a free choice. It needs to be reasonable when you make the original return. Once the parties know the amount, the actual rent replaces it.
Here, the final annual figure is £5,000 higher for each of three years. That is £15,000 more stated rent overall. The change in net present value will be a discounted amount, not necessarily £15,000.
- Keep the basis for the original market-rent estimate.
- Keep papers showing when the parties concluded the review.
- Recalculate using the rent that the parties actually agreed.
- Check whether the recalculation creates extra stamp duty.
How to analyse it
Start with the lease wording. Ignore the rent-review label. Ask whether the amount was unknown when the lease was granted, because that determines whether the original calculation needed a reasonable estimate. That timing matters.
- List the rent due in each year of the lease.
- Identify rent that varies or that no one knew at the start.
- For rent in the first five years, use a reasonable estimate in the original calculation.
- Work out the net present value using the statutory discount method.
- Record the date on which the uncertain rent became known.
- Recalculate the SDLT position from the actual figures.
- Where extra tax is due, make the required later filing and pay by the deadline.
Example
In HMRC’s example, once the parties agree the review on 1 July 2023, HMRC says the taxpayer should send an amended return by letter to Stamp Taxes by 31 July 2023. It should show the recalculated net present value. Pay any extra tax using the original SDLT return reference.
Why this can be difficult in practice
People often assume the first SDLT calculation is final. It is not where uncertain rent in the first five years required an estimate. The later figure matters.
- A market-rent clause may need a valuation before the parties settle the amount.
- The date of the review result can set the deadline for the later action.
- Do not confuse the extra rent with the change in net present value.
- HMRC’s example calls the later filing an amended return, while the legislation refers to a further return when extra tax is due.
Key takeaways
- Estimate uncertain rent reasonably when the lease starts.
- Revisit SDLT once first-five-year rent becomes known.
- In HMRC’s example, the later filing and payment were due within 30 days.
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 51 — reasonable estimates for uncertain or unascertained amounts
- FA 2003 Schedule 5 para 2 — rent tax based on net present value
- FA 2003 Schedule 5 para 3 — formula for discounting rent over a lease term
- FA 2003 Schedule 5 para 8 — the statutory temporal discount rate for rent
- FA 2003 Schedule 17A para 7 — variable rent in the first five lease years
- FA 2003 Schedule 17A para 8 — revising tax when uncertain first-five-year rent becomes known
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
- HMRC’s 2021 example calls the later filing an amended return sent by letter, while the current wording of Schedule 17A refers to a further return where extra tax is due. The example’s 31 July deadline is 30 days after the review concluded.
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 rent-review clause
- the original SDLT return and submission reference
- the valuation or agreement fixing the market rent
- the date when the rent became known
- the rent due for each lease 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 on a lease when market rent is set later [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 51 - reasonable estimates for uncertain or unascertained amounts https://www.legislation.gov.uk/ukpga/2003/14/section/51/2025-11-17 - FA 2003 Schedule 5 para 2 - rent tax based on net present value https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/2/2025-11-17 - FA 2003 Schedule 5 para 3 - formula for discounting rent over a lease term https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/3/2025-11-17 - FA 2003 Schedule 5 para 8 - the statutory temporal discount rate for rent https://www.legislation.gov.uk/ukpga/2003/14/schedule/5/paragraph/8/2025-11-17 - FA 2003 Schedule 17A para 7 - variable rent in the first five lease years https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/7/2025-11-17 - FA 2003 Schedule 17A para 8 - revising tax when uncertain first-five-year rent becomes known https://www.legislation.gov.uk/ukpga/2003/14/schedule/17A/paragraph/8/2025-11-17 Guidance page from HMRC on this topic (guidance, not law): https://www.gov.uk/hmrc-internal-manuals/stamp-duty-land-tax-manual/sdltm13205 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 - HMRC's 2021 example calls the later filing an amended return sent by letter, while the current wording of Schedule 17A refers to a further return where extra tax is due. The example's 31 July deadline is 30 days after the review concluded. 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 a lease when market rent is set later
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