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Do tenants have to pay Stamp Duty? (The answer may genuinely surprise you)13 Jan 2022

You’d be forgiven for thinking: ‘Have you lost your minds? Obviously, tenants don’t have to pay Stamp Duty (SDLT) that’s for property owners.’

But actually, sometimes they do. And it’s worth talking about, because as highlighted in Letting Agent Today earlier this week, it’s not widely known by tenants, but it’s also not necessarily known by agents!

When do tenants have to pay Stamp Duty?

Since 2003, it’s been possible for residential tenancies to be liable for SDLT under a not-widely-known law, although it only applies when a tenant has paid more than £125,000 in rent under a continuous or successively-linked lease.

Once they hit this threshold, they need to pay one per cent of the rental value as an annual tax. It has to be done within 30 days of the tenancy commencement date, or the date the lease was executed whichever happens to be earliest and it must be paid to the Inland Revenue via a declaration form SDLT1.

Before you think that £125,000 is a big number that most won’t reach in one rental property – it’s certainly possible in areas with higher rental prices. In fact, it’s even more possible with more and more tenants looking for longer-term leases.

The really important bit of information tenants need to know, is whether upon renewal of their tenancy agreement the contract is linked to the previous one, or whether it’s a completely new agreement. If it’s linked, then they could be liable to pay the extra tax if they reach the £125,000 threshold.

Communication is key

Since this story was published, we’ve seen it discussed in multiple places across social media, and there seems to be a high proportion of agents who were unaware of this rule, and some of those who have tenancies it may apply to.

This is why communication is so important. It’s not just about ensuring tenants have all of the information they need at the start of the tenancy and then stepping back, it’s great to have an ongoing dialogue.

How can you achieve this?

This is why we often talk about having an active and robust email list. You can have regular communication with tenants and provide updates about things like this, as well as other seasonal information about property maintenance and reminders of their obligations.

In fact, we’ve written about the importance of newsletters here. It’s a great way to keep an open dialogue going and build trust with tenants.

Not sure where to start with a newsletter? We can help. Get in touch.

Katie is a Freelance Copywriter living in rural Dorset with her daft old Labrador. She first started writing content for the property industry back in 2015, and loves nothing more than bringing brand voices to life!

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