SDLT and the Renters’ Rights Act: a promised tax fix

The Renters’ Rights Act 2025 introduces a fundamental change to the private rented sector in England.

As these rules come into force, the Government has proposed a change to prevent an unintended Stamp Duty Land Tax (SDLT) consequence for residential tenants.

From Friday 1 May 2026, fixed‑term assured shorthold tenancies are abolished and replaced with assured periodic tenancies. These have no fixed end date and allow tenants to remain in their homes until they choose to leave.

Under the current SDLT rules, tax can arise on rent where the total rent payable under the lease exceeds £125,000 (subject to a time adjustment). Fixed‑term residential tenancies rarely reached this threshold because each renewal was usually treated as a separate lease.

A periodic tenancy operates differently. For SDLT purposes, it is initially treated as a one‑year lease, with the tax position recalculated annually by reference to a growing deemed term as each year passes.  This would have meant SDLT filing obligations for tenants who remained in the same property for a number of years. Using average rents at March 2026, these obligations would have arisen as follows:

• properties in England (£1,434 per month): obligations apply from year 9 onwards 
• properties in London (£2,280 per month): obligations apply from year 6 onwards 
• three‑bedroom properties in Kensington and Chelsea (£3,966 per month): obligations apply from year 3 onwards

While the SDLT liabilities themselves would often have been modest, the requirement to submit annual SDLT returns would have imposed a new and unexpected administrative burden on long‑term tenants. Fixed penalties would apply for late returns even where little or no tax is due.

The Government’s proposed solution

In April, the Government confirmed its intention to legislate so that residential leases which qualify as assured tenancies will not give rise to any SDLT charge on the rent element. The change is intended to take effect retrospectively from 1 May 2026, subject to enactment in the Finance Bill 2026–27. HMRC has indicated it will not seek to impose SDLT on affected tenancies while legislation is progressed.

What will not change

The fix is deliberately limited. It does not affect SDLT on lease premiums and does not extend to arrangements outside the assured periodic tenancy regime, such as company tenants or non‑residential leases. In those cases, the existing SDLT rules continue to apply.

This does create a further layer of SDLT complexity, as identical periodic leases may be treated differently depending on the status of the tenant. We are pleased to assist with determining the correct treatment where arrangements fall outside the new exemption.

Overall, the announcement provides welcome certainty and removes a significant administrative obligation for tenants benefiting from the new regime. 

If you have any questions about how the proposed SDLT exemption applies to your tenancy arrangements, particularly where the tenant is a company or the lease falls outside the assured tenancy regime, please do get in touch.