Last updated: 14 October 2026
Do you pay stamp duty on the VAT charged on rent?
Yes, in most cases. When you take a new lease of commercial property and the landlord has opted to tax the building, Stamp Duty Land Tax (SDLT) on the lease is worked out on the rent including VAT. The VAT is part of the rent you have agreed to pay, so it counts towards the “net present value” (NPV) of the rent. The main exception is where the landlord hasn’t opted to tax by the date the lease is granted. In that case, VAT added later isn’t included.
How SDLT works on a new commercial lease
SDLT on a lease has two parts:
- The premium (any lump sum paid), taxed at the non-residential rates
2. The rent, taxed on the net present value of the total rent over the lease term
Non-residential SDLT on lease rent (NPV)
| Net present value of rent | Rate |
| Up to £150,000 | 0% |
| £150,001 to £5 million | 1% |
| Over £5 million | 2% |
The NPV discounts future rent at 3.5% a year. HMRC’s online SDLT calculator works it out for you.
When VAT is included
- The landlord has opted to tax the property before the lease is granted, so VAT is chargeable on the rent: include VAT
- The landlord hasn’t opted to tax at the date of grant: don’t include VAT, even if the landlord might opt later
- Residential leases: rent is normally exempt from VAT, so there is no VAT to include
Example
A 10-year office lease at £40,000 a year plus VAT (£48,000 a year in total). Over 10 years, the NPV of £48,000 a year at 3.5% is about £399,000. SDLT is 1% of the amount over £150,000, which is about £2,490. Without the VAT, the NPV would be about £333,000, and the SDLT about £1,830.
Can you reclaim the extra cost?
The VAT on the rent itself can usually be reclaimed by a VAT-registered tenant making taxable supplies. The SDLT is a tax on the transaction, so it isn’t reclaimable. It is a capital cost of acquiring the lease, which may be relevant for capital gains or capital allowances later. Businesses that make exempt supplies, such as insurers or some healthcare providers, usually can’t reclaim the VAT either, so the whole cost falls on them.
Filing the SDLT return
- File the SDLT return and pay within 14 days of the effective date, which is usually completion or when you take possession
- A return is needed if the SDLT is due, or if the NPV is over £150,000, even when no tax is due
- Rent reviews within the first 5 years may require you to recalculate
- Most leases are filed by your solicitor
Lease renewals and extensions
A new lease when an old one ends may get relief for “overlap” rent, so you don’t pay twice on the same period. Holding over after the term ends can create a new chargeable period. Your solicitor should check these points.
Frequently asked questions
Does the 5% surcharge apply to commercial leases?
No. The higher rates for additional dwellings only apply to residential property.
What if the landlord opts to tax later?
If the option is made after the lease is granted, the VAT isn’t normally included in the original calculation.
Do I pay SDLT on a short lease?
Only if the NPV of the rent goes over £150,000 or there is a premium.
Is stamp duty different in Scotland and Wales?
Yes. Scotland has LBTT and Wales has LTT, with their own rates.
Related: VAT accountants and how to calculate VAT.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with stamp duty on commercial leases. See our property tax accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
