Start with the type of lease transaction
Buying an existing lease from its current owner is different from receiving a new lease from a freeholder or developer. The first is generally called an assignment. The second creates a lease and can require separate consideration of the rent over its term.
Do not decide solely from whether the building is newly built. Ask the conveyancer whether the legal transaction is an assignment, a grant of a new lease, an extension or another arrangement. That answer controls which SDLT calculation is needed.
The premium is the purchase price of the lease
For an ordinary residential lease premium, the residential rate bands are relevant, subject to the buyer’s reliefs and surcharges. As an illustration, a standard-rate £350,000 premium gives £7,500 SDLT on the premium element.
That example is not a statement that every £350,000 leasehold transaction has a total £7,500 bill. A new lease can introduce rent calculations, and special terms may change the consideration. Our main calculator is deliberately scoped to straightforward freehold purchases.
New leases can involve tax on rent
For a new residential lease, SDLT can also be due on the net present value of the rent. HMRC explains the calculation using the rent schedule and lease term. Where the relevant net present value exceeds £125,000, a 1% charge can apply to the excess.
Net present value is not simply one year’s ground rent, and it is not always safe to multiply a single annual figure by the number of years. Rent changes, linked leases and the transaction’s exact terms may require specific treatment.
What to send to your adviser
Have the draft lease, premium, term, rent schedule, any review provisions and information about linked transactions available. For shared ownership, also establish the share purchased and whether a market value election is being considered.
Use HMRC’s official calculator or your conveyancer’s assessment for the full leasehold liability. Scotland and Wales have their own property transaction taxes, so these SDLT rules should not be carried over to a lease there.
RESEARCH & CORRECTIONS
Sources and review
Researched and maintained by StampDutyCal. Checked on against the official sources below. This is our own research, not an independent professional tax review. We update the website when rules change.