Tenants warned about having to pay for stamp duty

Tenants have been warned they are liable to pay stamp duty when cumulative rent exceeds £125,000.

With more people renting for longer portions of their lives, stamp duty payments could become a more pressing concern for tenants, lettings and estate agent Benham and Reeves has predicted.

In the event of surpassing that amount they are liable to pay 1% of the rent value as an annual tax

While £125,000 may seem like a large sum to reach, in London the average monthly rent value is £1,597, totalling an annual payment of £19,164. To reach the £125,000 threshold would therefore take 6.5 years. And once the threshold is broken the 1% annual SDLT bill would total £192 per year.

Marc von Grundherr, director of Benham and Reeves, said: “Tenants might feel they already get a rough ride – high rent payments, lack of security in their home, none of the freedoms that come with ownership, and so on – so the idea of now having to pay an ownership property tax is very unwelcome indeed.

“But unfortunately there is little they can do to change the situation should they reach this threshold, so it’s vital that tenants who believe they may reach or exceed it are aware of exactly what they owe and when.

“A good letting agent will be able to advise on this matter, but the truth is that this law is so unfamiliar to most that even your agent may not be fully aware of how it impacts you as a tenant.

“In any case, this additional outgoing may seem like the cherry on top of an already expensive cake, but failing to address it could be far more costly.”

Stamp duty must be paid separately from the rent payments via a declaration form SDLT1 to the Inland Revenue within 30 days of the date the tenancy commenced or the date the lease was executed, whichever is earlier.

If tenants don’t pay the tax they be faced with a significant tax avoidance fine from HMRC.

Tenants can avoid paying the stamp duty charge if the tenancy is negotiated on different terms, even if it’s with the same landlord. The cumulative effect only takes effect if renewed tenancies are linked to the old one.

Where tenants are likely to get charged stamp duty


In Kensington & Chelsea, where the average annual bill is £32,544 per year, the SDLT rental threshold would be exceeded in just 3.8 years, after which point the tenant will be required to pay an estimated annual SDLT bill of £325.

In Westminster the average annual cost of renting is £30,336, which means the threshold would be reached in 4.1 years and the subsequent tax bill would be £303 per year.

Meanwhile in Hammersmith & Fulham the average annual rent of £23,568 means the threshold would be met in 5.3 years and the tax bill would be £236 per year.

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