Renters’ Rights Act 2025: Strong in Protection, Weak in Tax Clarity

The Renters’ Rights Act 2025 (the “Act”) is a significant reform aiming to strengthen the position of tenants in residential tenancies. Taking effect from 1 May 2026, pursuant to the Act, most fixed-term assured shorthold tenancies will be abolished and all private rented tenancies will automatically become assured periodic rolling tenancies, meaning they will continue indefinitely until the tenant gives notice, or the landlord applies to the court for possession on a valid statutory ground. The Act also bans section 21 ‘no-fault’ evictions and provides for greater security and fairness for tenants in regard to rent increases, rental bidding, large upfront payments as well as discrimination protections.

While the Act represents a notable improvement in tenant protection, recent analysis by Tax Policy Associates has highlighted a potentially serious and unintended tax consequence.

Stamp Duty Land Tax (“SDLT”) Liability

Most people think of SDLT when they are buying a house.

What individuals may not be aware of is that SDLT is payable on leases as well. Every lease will have a Net Present Value (“NPV”) for SDLT purposes, and if a lease’s NPV is above £125,000, a UK individual will pay 1% (as of February 2026) on the portion above £125,000 (note: this is different for non-UK residents).

For most renters, SDLT liability would therefore be something that doesn’t even cross their mind.

Example: Anna’s 1 Year Lease

Anna has taken out a residential lease in Greenwich, London. Anna’s lease is for a term of 12 months and her rent is £1,500 per month (the term and rent are both based off of averages for the London area).

Using the Government’s SDLT calculator, Anna’s NPV is £17,391.

With NPVs this low for a lot of assured shorthold tenancies, it is clear why individuals wouldn’t even consider if they owed any SDLT.

(Figures are illustrative and based on the Government’s SDLT calculator at current rates as of February 2026)

The SDLT Issue that Arises with Assured Periodic Rolling Tenancies

The Act will be making assured periodic rolling tenancies the norm however no changes have been made to amend SDLT legislation.

The Finance Act 2003 advises that for a lease of indefinite term, which the new rolling tenancies will be, the lease is treated in the first instance as if it were a lease for a fixed term of 1 year. If the lease continues after the end of the term, it is treated as if it were a lease for a fixed term of 2 years. This could continue indefinitely, as can the tenancy.

This means that over time, the NPV will increase and if it ever exceeds £125,000, then SDLT will be due and an SDLT return and payment would be required. 

Continuing the Example:

Year 1: Anna’s NPV is £17,391 – no SDLT liability

Year 2: Anna’s NPV is £34,194 – no SDLT liability

Year 9: Anna’s NPV is £136,938 – £119 SDLT liability (the first year SDLT becomes due)

Year 12: Anna’s NPV is £173,940 – £489 SDLT liability

Year 20: Anna’s NPV is £255,823 – £1,308 SDLT liability

(Figures are illustrative and based on the Government’s SDLT calculator at current rates as of February 2026)

The current HMRC guidance suggests that SDLT paid on previous anniversaries does not reduce the liability due in each subsequent year.

Not only are the financial implications burdensome but the practical implications relating to filing SDLT returns and paying them promptly is extremely onerous on the tenant. In practice, most online filings must be made by solicitors, legal conveyancers or authorised agents, so individuals would either need to instruct someone and pay for these services, or file a paper return every year. Returns and payment have very strict deadlines and failure to comply with these deadlines results in harsh penalties. 

Government Response – What’s Next

The Financial Times has reported that a government spokesperson acknowledged awareness of the potential issue and is exploring the best way to address it. They also stated that they do not consider it to pose an immediate concern for tenants.

It is likely that any changes would be announced in a Budget.

If you have any questions regarding the contents of this article, please our commercial property team here or drop me an email. 

Sources:

Anomaly in UK rental reforms would leave thousands paying stamp duty

Lease reform: stamp duty headache for 150,000+ tenants

Stamp Duty Land Tax: Residential property rates – GOV.UK

Improve Property Returns: Pros and Cons of Assured Shorthold Tenancies | Opago

London rents map | London City Hall

Stamp Duty Land Tax online and paper returns – GOV.UK

Finance Act 2003

If nothing changes, we estimate that, in the next three years, 150,000 households in private rental accommodation will enter this annual regime. They will then have to pay and file every year for the rest of their tenancy.

https://taxpolicy.org.uk/2026/01/30/renters-rights-stamp-duty/