As a tenant, when am I liable for stamp duty?


Q I understand that a liability for stamp duty land tax (SDLT) arises for residential tenants when their cumulative rent exceeds £125,000. I am struggling to identify what level of liability I may face if I renew my rental agreement later this year.

I started renting on 31 January 2017 at a rate of £525 a week. The initial term was for two years. This was renewed for a further two years at the same rate, in November 2018. I will be asked in November this year whether I wish to remain in the property. If I do remain, assuming it’s on the same terms I will reach the £125,000 threshold by September 2021.

The HMRC website doesn’t clearly explain when the liability becomes due, how to report and pay it, or how its calculator decides what is a rental payment and what is a “premium”, the latter attracting a higher rate of SDLT.

Trying to find a layman’s explanation online has also proved fruitless. Many focus on the charge of 1% of rental but fail to explain the premium that seems to be at 3%.

The liability doesn’t appear to be excessive but I am unclear as to the process and the correct calculation. Are you able to offer any guidance?

A You are right that a tenant has to pay stamp duty land tax (SDLT) once his or her cumulative rent exceeds £125,000. In your case – and assuming annual rent of £27,300 (£525 times 52) – your cumulative rent will exceed the £125,000 threshold in year five of your continued tenancy.

But that assumes that when you renew the tenancy the renewal terms are linked to the old tenancy. If you were to negotiate a separate tenancy on different terms – even though your landlord is the same – the new and old tenancies wouldn’t be linked. So you would start counting from zero at the start of the new tenancy.

However, if your new tenancy did count as linked, you would need to pay the SDLT due within 30 days of the start of the tenancy or the date the SDLT liability is triggered.

You are also right that HM Revenue & Customs’ website is less than helpful, not least because the SDLT calculator is aimed at tax on property purchases rather than on rent. For example, the premium you mention is the purchase price of the lease on a leasehold property and it doesn’t crop up with SDLT on cumulative rent.

The correct calculation is 1% of the rent amount that exceeds £125,000. Assuming there is no change in the rent you pay, the SDLT bill will be £115. When SDLT becomes due you should complete and submit declaration form SDLT1 to HMRC. However, having looked at the form, I suggest you get expert help with filling it in.