As a landlord, this is not directly your liability, but it is worth being aware of, especially as your tenants are unlikely to receive any proactive notification from HMRC.
You may be familiar with the headline changes the Renters’ Rights Act will bring when it comes into force in England on 1 May 2026. However, there is a lesser-known knock-on effect that could affect tenants, relating to Stamp Duty Land Tax (SDLT).
SDLT does not only apply to property purchases. It can also apply to leases, based on the total rent payable over the term of the lease. Under the current system, this has rarely been an issue for residential tenants. Most tenants have assured shorthold tenancies, and because of this, simply do not generate enough cumulative rent to cross the £125,000 threshold at which SDLT kicks in.
However, the Act will change tenancies into periodic tenancies that roll on indefinitely. For SDLT purposes, this means the tenancy may be treated as a single, ongoing lease, with the total rent accumulating year on year until the threshold is eventually crossed.
For tenants paying average rents, it could take over a decade to reach the threshold, and the tax itself (1% on the excess above £125,000) will often be modest when it does. However, tenants in London and other high-rent areas may reach that point sooner.
In terms of compliance, once the threshold is first crossed, the tenant has just 14 days to file an SDLT return and pay any tax due, and in every subsequent year there is a 30-day deadline from the anniversary of the tenancy. These are tight windows, the penalties for missing them can exceed the tax itself, and most tenants will have no idea this obligation even exists.
Additionally, this could unintentionally affect student houses, if they sign one joint tenancy. For example: seven students share a house in London (a HMO) and they sign one joint tenancy, each pays £900 per month, totalling £75,600 per year. Under the current system this would usually have been a one-year tenancy and no SDLT would be due (as the annual rent is below the threshold of £125,000).
However, after 1 May 2026, the tenancy will be treated as ongoing, meaning they would likely breach the SDLT threshold in year two i.e. two years of annual rental of £75,600 = £151,200, which is above the threshold (further adjustments will be required to this figure for SDLT purposes, but this shows how quickly the threshold could be breached).
If the HMO was let on separate tenancies, then the issue wouldn’t arise (as SDLT would look at each individual tenancy separately). Many non-student HMOs already operate using separate tenancy agreements, which means this issue would not typically affect them.
Contact James Geary for more information by emailing james.geary@randall-payne.co.uk or call 01242 776000.