After a great deal of anticipation, phase 1 of the Renters’ Rights Act 2025 came into force on 1 May 2026.
Over the past 12 months or so, we have commented at length on the key reforms that are set to fundamentally change the private rented sector and you can explore our articles here.
One of the most significant changes is that all existing fixed-term assured shorthold tenancies
converted into monthly assured periodic tenancies (APTs) on 1 May 2026 and all new tenancy agreements signed on or after this date are now periodic.
The monthly period will need to mirror the rental period - e.g. if rent is paid on the first of the month, then the rental period will run from the first to the last day of the month. Any agreements providing for a fixed-term or a rental period longer than a month will be invalid. Furthermore, landlords or 'relevant persons' who 'purport to let' a property for a fixed-term period risk incurring a civil penalty of up to £7,000.
A periodic tenancy is a tenancy of a certain period, such as a month or a week, continuing on a rolling basis with no end date whereas a fixed term tenancy has a defined length - usually six or 12 months with a fixed start and end date.
Under the old regime, landlords typically granted fixed-term tenancies which were either renewed on expiry or, as was more typical, automatically converted into statutory periodic tenancies by allowing the tenants to remain in occupation past the end date - this was colloquially known as 'holding over'.
The legislative intent behind the abolition of fixed-term assured tenancies was to give tenants greater flexibility, allowing them to respond to changes in their personal circumstances such as a job relocation or divorce without being tied into lengthy tenancies.
However, until a week or so before the new legislation was implemented, there were concerns that as there was no end date, the net present value (NPV) of the rent paid under an assured periodic tenancy would accrue over time and ultimately exceed the £125,000 stamp duty land tax (SDLT) threshold, triggering potential SDLT liabilities.
Under the previous legislation, the vast majority of private tenants did not reach the NPV threshold of £125,000, and were not liable to pay SDLT on their rent. This is because the NPV of assured shorthold tenancies, which made up the majority of private tenancies, would reset at each renewal, tended to renew regularly and therefore the net present value of the rent was calculated over a relatively short duration.
This technical interaction between the Renters’ Rights Act 2025 and the SDLT legislation created apprehension that private renters could face SDLT liabilities and associated return filing obligations, potentially leading to either:
However, on 22 April 2026, HM Treasury announced that the Finance Bill 2026-27 will exclude the net present value of rent under assured periodic tenancies from SDLT. The relevant provisions of the Finance Bill 2027 apply retrospectively, taking effect from 1 May 2026. The mechanics of this legislative exclusion are yet to be set out, but HMRC has confirmed that it will not collect any SDLT on the rent element of an assured periodic tenancy from 1 May 2026.
The Renters’ Rights Act 2025 introduces a significant and complex reform, and the private rented sector will need time to adapt to the new regulatory framework. Landlords, tenants and their advisers will therefore welcome the fact that this transition is not further complicated by an unintended and burdensome interaction with the SDLT regime.
For further information and advice, please contact our property litigation team.
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