Does Stamp Duty apply to Lease Extensions?
When extending the lease of a flat or house in the UK, one important financial consideration is Stamp Duty Land Tax (SDLT). Many property owners are unaware of how SDLT applies to lease extensions, leading to confusion and unexpected costs. Here’s a concise guide to help you navigate the key aspects.
Stamp Duty Calculator for Lease Extensions
What is Stamp Duty Land Tax?
SDLT is a tax payable on certain property transactions in England and Northern Ireland. While it is commonly associated with property purchases, SDLT can also apply to lease extensions if the premium (the amount paid to extend the lease) exceeds a certain threshold.
When Does SDLT Apply to Lease Extensions?
For residential properties, unless you are a non-UK resident, SDLT is charged if the premium paid for the lease extension exceeds £250,000 up until April 2025.
If the premium is above these thresholds, the SDLT payable is calculated on the excess amount. For example:
- If you pay £300,000 to extend your lease, SDLT will be charged on £50,000 (£300,000 - £250,000).
How is SDLT on lease extensions calculated?
The SDLT rates for residential properties are tiered as follows:
- 0% on the first £250,000
- 5% on the portion between £250,001 and £925,000
- 10% on the portion between £925,001 and £1.5 million
- 12% on the portion above £1.5 million
Using our previous example, if the premium is £300,000:
- No SDLT on the first £250,000
- 5% on the remaining £50,000 = £2,500 SDLT payable.