The Renters’ Rights Act and SDLT: An unintended tax consequence avoided

The Government’s reform of the private rented sector is intended to give tenants greater security and stability. But, up until very recently, it also had an overlooked side‑effect: it would have brought hundreds of thousands of ordinary renters into the Stamp Duty Land Tax (SDLT) regime.

That outcome now looks set to be avoided. On 22nd April 2026, the Government confirmed it will legislate retrospectively so that no residential assured tenancy will give rise to SDLT on rent because of the Renters’ Rights Act.

Even so, the episode is a useful illustration of how seemingly technical tax rules can interact unpredictably with housing reform.

The current position 

Most private residential lettings are currently granted as assured shorthold tenancies, typically for one or two years. If both parties wish to continue, a new fixed‑term tenancy is usually agreed. 

This structure is important for SDLT. While SDLT can apply to all leases, including short residential leases, it is charged only where the net present value (NPV) of the rent exceeds £125,000, a level that would require exceptionally high rent over a one‑ or two‑year term. As a result, most residential tenants pay no SDLT, and where no tax is payable there is no obligation to file an SDLT return. 

What the Renters’ Rights Act changes and why it matters  

From 1st May 2026, the Renters’ Rights Act abolishes fixed‑term assured shorthold tenancies in England. In most cases, residential tenancies will instead become periodic, continuing indefinitely until the tenant chooses to leave. This is a deliberate policy choice, intended to give renters greater security and flexibility. 

However, the Act did not amend the existing SDLT rules for periodic tenancies. Under those rules, a periodic tenancy is treated as a “growing lease”: initially a one‑year lease for SDLT purposes, then two years, then three, with the net present value (NPV) of the rent recalculated on each anniversary. Once the cumulative NPV exceeds £125,000, SDLT becomes payable and filing obligations arise. 

In most cases the tax itself would have been small. The real problem was practical. Ordinary tenants would have been required to track anniversary dates, perform statutory NPV calculations and file SDLT returns, often every year, for liabilities measured in tens or even single‑digit pounds. Penalties for non‑compliance could easily have exceeded the tax due. 

Had the rules been left unchanged, this would not have been a niche issue. Estimates suggest that, in total, around 330,000 households could eventually have been affected. 

A welcome course correction 

In April 2026, the Government confirmed it will legislate in Finance Bill 2026–27 to ensure that no assured residential tenancy gives rise to SDLT on the rent element as a result of the Renters’ Rights Act. 

Crucially, the change will apply retrospectively from 1st May 2026, and HMRC will not seek to collect SDLT on rents in the meantime. This ensures tenants and landlords are not exposed to unexpected tax obligations arising purely from a technical interaction between housing reform and tax law. 

The fix is sensible and proportionate. SDLT is not designed to impose ongoing compliance burdens on hundreds of thousands of tenants for trivial amounts of tax. Addressing this issue avoids a costly administrative exercise for both taxpayers and HMRC and removes a significant unintended consequence from an otherwise tenant‑focused reform. 

The episode does, however, serve as a reminder that technical interactions between different areas of law can have real‑world consequences, and that those interactions need to be tested early, not discovered by tenants receiving penalty notices years later.