Stamp Duty Land Tax (SDLT) and Lease Extensions

Linz Darlington | January 2024

When you purchase a property you often have to pay Stamp Duty Land Tax, also known as SDLT.

However, the good news is that most people don’t need to pay stamp duty (SDLT) on their lease extension premium. Even if you do have to pay Stamp Duty on your lease extension premium, this would not be paid on the professional fees related to the transaction.

This article explains this in more detail - but please note it is just a summary of Government guidance. It should not be taken as tax advice.

Do you only own one residential property?

If you’re extending the lease on the only property you own (in the world) then you would only need to pay Stamp Duty (SDLT) if the premium is over £250,000. If you are either married to someone who owns more than one property, or a co-owner of your flat does, please read the next section.

The £250,001 threshold is set because a lease extension is considered the same as purchasing a property and Stamp Duty Land Tax is only payable on purchases over £250,000.

In this case you will only pay Stamp Duty on the bit above £250,000.

So, if the lease extension premium is £300,000, you’ll pay Stamp Duty on £50,000. You can get an idea of the rate you would pay here.

As a result, unless you have very high value flat (in somewhere like Belgravia) or you have a very, very short lease then you are unlikely to have to pay SDLT on your lease extension.

Do you own more than one residential property (or are married to or own the property with you does)?

However, the story is little different if you own multiple properties. Even if you only own one property, if you are married to someone or own the flat with a friend who owns more than one property this rule also applies. In this case, you’re likely to have to pay the Stamp Duty if the cost of the lease extension is more than £40,000.

Unless your lease is below 80 years (or you have a very high ground rent) then you're still unlikely to pay SDLT.

The £40,000 threshold is due to the Higher Rate of Stamp Duty, which kicks in at £40,000.

Confusingly, the way this works is that if your lease extension premium is £40,000 or above you will pay Stamp Duty on the whole amount. This means if your lease extension premium is £50,000, you’ll pay Stamp Duty on £50,000 – not £10,000.

Equally, it is worth noting that this payment would apply if you own more than one property, even if the flat you are extending the lease on is your main residence.

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Linz is the CEO and co-founder of Homehold. He’s always looking at how we can improve our service and better support you through the lease extension process. If you have any questions about your lease he’d be delighted to help.

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