The Renters’ Rights Act’s Hidden Tax Trap: Why Your Tenants Could Face Unexpected Stamp Duty Bills

The Renters’ Rights Act was designed to give tenants greater security.

From 1 May 2026, it abolishes assured shorthold tenancies and converts most residential lettings in England into open-ended periodic tenancies – no more fixed terms, just rolling month-to-month agreements.

On the surface, this looks like a win for renters – although we have raised some nuances and potential problems it brings to certain lettings scenarios before, such as student rentals, just as one example.

But there’s another unintended consequence that tax specialists are now highlighting: a potential stamp duty liability for tenants triggered by the structure of periodic tenancies themselves.

The Stamp Duty Anomaly Explained

Briefly, this is how the problem works.

Under existing SDLT rules for leases, indefinite or periodic tenancies can fall into a regime in which tax specialists expect that a stamp duty land tax calculation will be required each year the tenancy continues.

Liability is not based on the capital value of the property, but on the net present value (NPV) of the rent.

This is triggered once the net present value of the rent over the life of the tenancy exceeds £125,000. For traditional one-year fixed-term tenancies, you would need fairly eye-watering rents – around £10,500 per month – for a single year’s rent to trigger the charge. As a result, only a small number of households across England currently pay stamp duty on their rent.

Periodic tenancies operate differently. Under the “growing lease” rule, on each anniversary, the prevailing net value (the Net Present Value, or NPV) must be recalculated as if the tenancy were a lease for that cumulative period. Year one, year two, year six – the clock doesn’t reset. The tenancy keeps being treated as a lease that is getting longer every year.

Modelling by tax specialists suggests that, for a typical London tenant paying about £2,000 per month, the SDLT threshold could be reached after roughly six years, with an initial bill of around £70.

£70? Is that all the fuss is about?

It is a logical question to ask – but whilst it might not sound like much, you must first consider what comes next.

The Real Burden: Ongoing Filing and Complexity

The real problem isn’t the tax itself. £70 a year is a nuisance, but for this purpose, let's agree that it is affordable.

The problems come from the extra admin involved – and the real cost comes from the risk of getting things wrong.

Once SDLT becomes payable, tenants are expected to file returns on each anniversary for as long as the tenancy continues, and the NPV remains above the threshold.

Late or missed returns will attract penalties that might start in the low hundreds of pounds and escalate if the delay continues.

The trouble is, the calculation itself is far from straightforward. Tenants would need to understand the rules, monitor anniversary dates, carry out NPV calculations, and file stamp duty returns – something most people won’t anticipate and will find highly inconvenient.

Most tenants have never heard of net present value calculations. Even accountants must find them tedious. The idea that ordinary renters will suddenly become tax experts is, frankly, unrealistic.

Of course, Tenants should check with HMRC guidance or a qualified tax adviser if they have questions about SDLT. 

Who Will Be Affected?

Analysis by independent tax commentators, Tax Policy Associates, a non-profit that advises politicians and lawmakers, suggests that around 150,000 privately renting households could face stamp duty liability within three years, with numbers potentially rising to around 330,000 by 2031 as long-term tenancies continue to roll on.

Tenants in high-rent areas are particularly exposed. Tenants here in London could reach the threshold in approximately six years based on current rental prices – but there will be plenty of examples where this impact could be even more immediate.

For example, you only need to consider a student house in London with eight tenants, each paying £1,000 per month. It’s a higher-end rent-per-room amount, admittedly, but it wouldn’t be unheard of.

Collectively, they would pay £96,000 annually, which falls short of triggering the liability in year 1, but could face a stamp duty bill of roughly £573 after that first year, based on current illustrative calculations.

Students tend to move on rather than stay in the same house, and these figures are estimates based on current rents and assumptions – but they highlight the potential scale of the issue.

What the Government Says

The government has acknowledged that newly created periodic tenancies under the Renters’ Rights Act could bring more tenants within the SDLT net, but maintains that no one will be affected until the rent they pay (on an NPV basis) is worth more than £125,000, which, on their own estimates, would take most tenants more than seven years.

As we’ve indicated above, there are bound to be some tenancies that get caught up in this net sooner than this.

Officials have indicated that any changes needed to accommodate the new tenancy system would be announced in a future Budget or Finance Bill. One solution suggested by tax experts is to defer filing requirements until stamp duty liability reaches £5,000, which would limit SDLT on rent to only the very highest-value properties, and only after many years of occupation.

However, as of early 2026, there is no legislative fix in place. The Act comes into force on 1 May 2026, and the core SDLT rules for leases remain unchanged.

What This Means for Landlords in South London

While the legal obligation to pay SDLT on rent falls on tenants, landlords need to be aware of this emerging issue.

Tenants who suddenly face unexpected tax bills and filing requirements may:

• Become less willing to stay long-term in properties they’d otherwise have remained in.
• Demand rent reductions to offset the tax burden.

There’s also a question of professional expectations. Should letting agents be flagging the possibility of SDLT liability when tenants enter into periodic tenancies, especially at higher rents or where long stays are likely? What happens if tenants later claim they were never told this might be an issue?

The answer is almost certainly ‘yes’ – but the knock-on effect will, of course, be agents and landlords at odds over what exactly needs to be disclosed, and how.

To strike a sensible balance, agents might:

• Include an SDLT warning in tenant information packs for higher‑rent lets and a note on what could transpire in long-term occupancies.
• Make it clear this is a tax issue that tenants may wish to discuss with HMRC or a qualified adviser, rather than something the agent can advise on in detail. And that’s true – letting agents are not specialist tax advisors.
• Keep an eye on announcements in the Budget or other fiscal events for any SDLT changes relating to periodic tenancies, and update their materials promptly.

The Bigger Picture

This stamp duty anomaly is a clear example of how well-intentioned legislation can create complex tax side‑effects if the rules aren’t fully aligned.

The Renters’ Rights Act was designed to give tenants stability and security. Yet the interaction with SDLT rules risks creating a system in which some long-term renters may face annual HMRC paperwork, complex tax calculations they don’t understand, and penalties if they get it wrong.

Ministers insist most tenants won’t be affected for many years, and promise to “look at” the issue. That offers reassurance, but you can understand if a significant number of the tens of thousands of households who, on current modelling, could cross the threshold within three years, feel that this reassurance is limited. And what about students and other sharers, particularly those in Sui Generis HMOs (large HMOs with more than 7 bedrooms), who may find themselves with a sizeable tax bill sooner than they might think?

Tenants want security and fairness, and the Renters’ Rights Act was designed to provide both. If nothing changes, however, many tenants may find they’ve also acquired a new layer of bureaucracy to deal with.

For landlords, the key is to stay informed, signpost tenants to proper tax advice where appropriate, and be ready to update your documentation quickly if – or, ideally, when – a formal SDLT fix finally arrives.

On balance, we suspect one will arrive. This feels like an oversight that the government will move to correct through an amendment. Nevertheless, that correction may take time.