Under current law a rent increase after the fifth year of a lease does not create a further SDLT charge, however large it is. The abnormal rent increase rules in paragraphs 14 and 15 of Schedule 17A to the Finance Act 2003 were removed by Finance Act 2013 for any increase taking effect on or after 17 July 2013. They now matter only for increases that took effect before that date, where the old test treated a rise as abnormal if the excess rent was more than the previously taxed rent multiplied by the number of whole years and divided by five.

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What was the abnormal rent increase rule?

SDLT on rent is charged on the net present value (NPV) of the rent over the term, and the NPV only looks at actual or estimated rent for the first five years. Rent for later years is assumed to stay at the highest level reached in the first five years. That leaves an obvious gap: a lease could set a low rent for five years and a much higher rent afterwards.

The old paragraph 14 closed that gap. If, after the end of the fifth year of the term, the rent increased, whether under the lease or otherwise, and the increase was abnormal, the increase was treated as the grant of a new lease in consideration of the excess rent. The excess rent was the new rent less the rent previously taxed. The deemed new lease was treated as granted on the date the increased rent first became payable, for the unexpired part of the original term, and as linked with the original grant.

How did the old test work?

Paragraph 15, in the form it took from 2006 until its repeal, set out three steps.

  1. Find the start date. Usually the beginning of the term. For a lease with variable rent it was the start of the period that set the assumed rent after year five, and where there had been a variation increasing the rent in the first five years, it was the date of that variation. After an earlier abnormal increase, it was the date of that increase.
  2. Count the whole years (Y) between the start date and the date the new rent first became payable.
  3. Compare. The increase was abnormal if the excess rent was greater than R multiplied by Y, divided by 5, where R was the rent previously taxed.

The rent previously taxed was normally the rent without the increase. For a variable rent lease it was the rent assumed for years after the fifth. After a variation in the first five years, it was the rent fixed by that variation.

Illustration only. A lease was taxed on a rent of £50,000. Six whole years after the start date the rent rose. The threshold was £50,000 × 6 ÷ 5 = £60,000.

New rent Excess rent Abnormal under the old test?
£100,000 £50,000 No, it is not more than £60,000
£115,000 £65,000 Yes, SDLT on a deemed lease of £65,000 a year for the unexpired term

Under the current rules, neither increase would create any SDLT, provided it took effect on or after 17 July 2013.

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When did the rule stop applying?

Paragraph 7(1) of Schedule 41 to the Finance Act 2013 omitted paragraphs 14 and 15. Paragraph 8(5) says the change has effect for any increase in rent that takes effect on or after the commencement day, and paragraph 8(6) defines that as the day the Act was passed, which was 17 July 2013.

HMRC’s manual at SDLTM13135 confirms that rent changes after the first five years are ignored unless they took place before 17 July 2013 and were abnormal under the old paragraphs. The same page also describes the rules as abolished for leases with an effective date on or after 17 July 2013. The statutory test is the date the increase takes effect, so an old lease with a review after that date is also outside the rule.

How are rent rises after year five treated now?

They are simply ignored. SDLTM13135 explains that the rent for every year after the fifth is replaced by the highest rent payable in any consecutive twelve month period in the first five years. SDLTM13160 adds that a rent review falling after the end of the fifth year is disregarded when calculating the NPV, and that this also applies to statutory reviews of agricultural tenancies.

There is a further concession for reviews just inside year five. Under paragraph 7A, as HMRC applies it at SDLTM13165, a first review to an amount that cannot be known in advance, such as market rent, is treated as falling after year five if it falls in the last three months of the fifth year. That means a review after four years and nine months is ignored.

What still triggers extra SDLT on rent?

The removal of the abnormal increase rules does not mean rent is never revisited. Two rules remain, both tied to the first five years:

  • Review of estimates. If the NPV included estimated or contingent rent for the first five years, paragraph 8 requires it to be recalculated at the end of year five, or earlier when the rent becomes known. SDLTM13155 says a higher NPV needs a further return by letter within 30 days, with the extra tax. A lower NPV can be reclaimed, and HMRC says there is no time limit for that claim.
  • Variations increasing rent. Under paragraph 13, a variation that increases rent in the first five years, outside the terms of the lease, is treated as the grant of a new lease for the additional rent. SDLTM15010 says that where the deed of variation is signed within the first five years but the increase does not take effect until after them, paragraph 13 does not apply.

Other changes, such as extending the term, are dealt with under different rules. See SDLT on leases for variations, surrenders and regrants.

Who still needs to know the old rule?

Because the repeal applies only to increases taking effect on or after 17 July 2013, an abnormal increase that took effect before that date remained within the old charge. That can come up when reviewing the history of an old lease, for example on due diligence before buying a lease or a company that holds one, or when HMRC raises questions about returns that should have been made at the time.

What mistakes come up most often?

  • Filing further returns for later reviews. Advisers who remember the old rules sometimes treat a large review in year ten as a new chargeable event. It is not.
  • Building later reviews into the NPV. Reviews after year five are disregarded. The highest rent in the first five years is used for the rest of the term.
  • Forgetting the year five recalculation. Where early rent was estimated, the recalculation under paragraph 8 is still required.
  • Confusing a rent rise with holding over. A tenant staying on after the term is a different charge, explained in SDLT when a tenant holds over.
  • Assuming the rules are the same across the UK. Scotland and Wales have their own lease rules. See LBTT on leases and SDLT, LBTT and LTT compared.

For late filing penalties on any further return that is required, see SDLT return deadline and penalties.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.