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HMRC internal manual

Stamp Duty Land Tax Manual

Calculation of stamp duty land tax: Lease premium

Stamp duty land tax (SDLT) on lease premiums is charged at a fixed percentage rate as determined under FA03/S55. See SDLTM00050 for the table of rates and thresholds.

However where consideration for a lease is in the form of both premium and rental payments, under FA03/SCH5/PARA9 special provisions apply which mean that the nil rate band is not available in respect of the premium if the average annual rent (called the “relevant rental figure”) exceeds £1000 per annum for mixed use or non-residential leases.

Provided that the relevant rental figure does not exceed £1,000, the premium will be charged according to the usual rates and thresholds, including the 0% rate for premiums not exceeding:

Residential leases - £ 175,000 (until 31 January 2009) and “£125,000 (from 1 January 2010).

Commercial or mixed-use leases - £150,000 (as at FA2006).

However if the relevant rental figure exceeds £1,000, the 0% rate does not apply to the premium element of the consideration for mixed use or non-residential leases, so all the consideration consisting of premium is chargeable at a rate of 1% or higher.

Note that in certain circumstances:

* in relation to English leases, ‘rent’ payable in respect of the period before the date on which the lease is granted may be taxable as a premium- see [SDLTM17110]( in the English manual. In Scotland, however, rent can be properly charged for the period prior to the formal execution of the lease (see [SDLTM18725](
* rent deposits may be treated as a premium for the grant of the lease- see [SDLTM18440](

For guidance on the relevant rental figure, see SDLTM18415.