Earlier this year the government introduced higher rates of Stamp Duty Land Tax on additional residential properties, but did you know that this also applies to certain lease extensions? Brady Solicitors’ Head of Conveyancing, Lesley Brentnall, explains.

Under the new rules, if you are extending a lease on a property which is not your only property and the agreed premium is £40,000 or over, then the 3% stamp duty surcharge may apply. For corporate entities extending a lease where the premium is over £40,000, the additional rates will also apply, irrespective of how many properties are owned.

Despite the terminology used, a lease extension or variation operates as a surrender of the existing lease and the grant of a new lease. Stamp Duty Land Tax (SDLT) is normally chargeable on the surrender and regrant of a lease (provided the payment does not fall within the nil rate band) and is calculated by reference to the rent payable under the lease and any other financial consideration given.

Lease extensions, however, are usually exempt from SDLT because where the surrender of a lease is given in consideration of a new lease being granted between the same parties, neither the surrender of the old lease or the grant of the new lease are regarded as chargeable consideration for the purposes of SDLT. But, since the government introduced the additional 3% “surcharge” to SDLT rates, intended to apply to second homes, many lease extensions are now feeling the impact.

Our message

If you are considering a lease extension on your property, which is not your main residence, or you are a corporate investor be aware that you will need to factor in an additional 3% into your finances for SDLT if the agreed premium for the extension is £40,000 or more.

For further information or advice on extending your lease, please contact Brady Solicitors’ lease extension experts.

For more information on lease extensions, these recent Brady Solicitors blogs may be of interest:

Lease extension expertise saves flat sale from unhappy ending

Lease extension – dealing with a difficult landlord