Long-term rental tenants and those who rent high-value properties might have to pay stamp duty, as stated in an frequently overlooked clause in some tenancy agreements.
If a tenant’s accumulative rent payments for a single property exceed £125,000, they could be required to pay 1% SDLT, otherwise known as stamp duty. Even during the Covid-inspired stamp duty holiday, this particular clause is unaffected.
The clause is not included in all tenancy contracts, so it’s worth checking yours closely if this news concerns you. It is more common in high-value rented properties than low-value properties
HMRC states that, if your lease renewals are treated as ‘successive linked lease’, your cumulative rent payments make it necessary for you to pay this 1% SDLT. Successive linked lease means that a tenancy agreement is renewed between the same parties, usually the tenant and the landlord, and where the terms remain the same.
So, if you’re paying £2,000 a month for your rent, constantly renewing the same 12-month tenancy agreement, for example, you will break the £125,000 mark around 5 years in and could be required to pay the stamp duty. If you’re renting a high-value property, this threshold will arrive even sooner.
More pain for renters
Although the pounds-and-pence total you’ll have to pay for that 1% tax is relatively small, it’s the apparent unfairness that is riling tenants and market experts who claim it’s just another way for the law to punish renters – certainly given that, since December 1st, 2003, the responsibility for paying the tax lies solely with the tenant, not the landlord.
Our in-house property expert, Russell Quirk, spoke to yourmoney.com about the issue:
“Stamp duty is a draconian tax in any case, a burden originally placed on the public in 1694 to fight a war on France, which now reaps over £9bn each year from aspirational homeowners whose ‘crime’ as a trigger for the levy, is merely to aspire to own a property. Adding further penalties for second home owners, landlords, foreign buyers and yes, tenants that pay over £125,000 in cumulative rent, is simply highway robbery in my view.”
Have you had to pay stamp duty on your rented home? Tell us your experience in the comments section below. And if you have a rent-based question for our property expert, Russell Quirk, you can drop that below, too.