- New tenancy rules raise tax questions
- Thousands may face surprise paperwork
- Government says issue not immediate
Thousands of UK households could find themselves facing unexpected stamp duty bills because of an anomaly in the way the new renters’ rules interact with the tax system.
Changes under the Renters’ Rights Act, due to come into force in May, will move most residential tenancies in England to an indefinite basis. Fixed-term contracts, which can lock tenants into unfair conditions, are set to be abolished.
But tax experts say the shift has an unintended consequence. Under current rules, an indefinite or “periodic” tenancy requires a stamp duty land tax calculation each year. The tax only becomes payable once cumulative rent crosses £125,000, but the paperwork obligation exists regardless.
Dan Neidle, head of think-tank Tax Policy Associates, has calculated that around 150,000 households in private rented homes could become eligible for stamp duty within three years. That figure could rise to about 250,000 by 2031 if nothing changes.
Neidle reportedly said that while the tax bill itself would usually be small, the real issue is awareness. “Calculating and filing the tax — and doing so every year — is something we believe most people won’t anticipate,” he said, as quoted in a news report.
The concern is not that tenants will suddenly owe large sums, but that many may not realise they need to keep track of cumulative rent or submit regular filings.
Government plays down immediate impact
A spokesperson for the Labour Party said the department was aware of the potential problem and was looking at how best to resolve it. The spokesperson added that it was “not an immediate problem for any tenant”, noting that most renters would take more than seven years to reach the £125,000 threshold.
The Ministry of Housing, Communities and Local Government said stamp duty in the private rented sector only applies once cumulative rents exceed £125,000. It explained that new assured periodic tenancies are initially treated as one-year terms and would not be immediately liable after the new law starts.
The department added that periodic tenancies could become liable if they run beyond a year, but said the threshold is unlikely to be reached for the vast majority of tenants. Any changes needed to align the new tenancy system with stamp duty rules would be announced at a future fiscal event, it said.
For now, renters are unlikely to see an immediate bill landing on the doormat. But the interaction between housing reform and tax law has raised fresh questions about whether the system is keeping pace with the way people actually rent homes.
