SDLT and the Renters’ Rights Act: the compliance risk few tenants expect

One of the most significant reforms taking effect from 1 May 2026 is the abolition of all new fixed‑term residential tenancy agreements. Every tenancy will convert to, and every new tenancy will be, a periodic tenancy with no fixed end date. As a result, a tenancy may roll on from year to year indefinitely. If it continues for long enough, it may trigger an SDLT liability for the tenant.

This issue arises under what is commonly referred to as the “growing lease rule”. SDLT is charged on leases where the net present value (NPV) of the rent exceeds the current nil‑rate threshold of £125,000 [per year]. SDLT is payable at 1% of the NPV above that amount. Because tenancies will no longer have a fixed term, the rent can accumulate over time and eventually exceed the threshold — and in high value rental properties, this can happen sooner than expected.

Although the SDLT payable may be relatively small, the administrative burden is more significant. Once a tenant crosses the threshold, they must submit an SDLT Return to HMRC within 14 days. HMRC imposes automatic penalties for late filing, £100 for filing more than 14 days after the due date, this is doubled if the return is over three months late. This is in addition to interest on any tax owed.

Late filing can also create wider repercussions for some, particularly if you are an advisor required to register with HMRC under the forthcoming tax registration changes.

How we can help

The interaction between SDLT and the Renters’ Rights Act 2025 is an example of how well‑intentioned reform can create unexpected tax and compliance issues. Wedlake Bell advises landlords, tenants and professional advisers on how to navigate these changes with clarity and confidence. Please contact us for further information.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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1. 

   • Parminder Sidhu

   • Partner
   • Residential Property

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2. 

   • Michael Ridsdale

   • Partner
   • Corporate Tax

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