Renters’ Rights Act: An overlooked tax issue for tenants

The Renters’ Rights Act, which came into force in England on 1 May 2026 (with similar provisions in Wales from 1 June 2026 and Scotland at a later date), brings significant changes that landlords should be aware of. Alongside the widely discussed reforms to tenancy structures, the Act introduces new anti‑discrimination protections and creates a lesser‑known Stamp Duty Land Tax (SDLT) consequence for tenants.

Under the Act, landlords and letting agents will be prohibited from refusing applicants solely because they receive benefits or have children. Any blanket policy excluding these groups may result in fines imposed by the Local Authority, in addition to the existing risk of claims under the Equality Act for indirect discrimination.

Importantly, this does not mean landlords must accept all applicants. The Act permits landlords to consider affordability, and applications can still be refused where it is clear a tenant cannot reasonably afford the rent. Where multiple tenants apply for the same property, landlords should ensure that decisions are based on legitimate, non‑discriminatory factors and are clearly documented.

To protect against compensation claims or enforcement action, landlords are advised to retain copies of adverts, application forms, affordability checks and decision‑making notes for at least six years, which aligns with the limitation period for claims.

In addition to these letting changes, the Act also has an indirect tax implication for tenants that many are unaware of. SDLT applies not only to property purchases but also to leases, based on the total rent payable over the term. Historically, this has been irrelevant for most residential tenants, as short‑term tenancies rarely generated enough rent to exceed the £125,000 SDLT threshold.

However, the move to open‑ended periodic tenancies changes this position. SDLT treats a rolling tenancy as a single, continuously extending lease, meaning total rent accumulates year on year. Once the £125,000 threshold is crossed, SDLT becomes payable at 1% on the excess, with more expensive rental areas reaching this point sooner.

When the threshold is first exceeded, the tenant has just 14 days to file an SDLT return and pay the tax due, followed by annual filing requirements within 30 days of each tenancy anniversary. Penalties for missing these deadlines can exceed the tax itself, and most tenants are unlikely to receive proactive reminders from HMRC.

While the SDLT liability rests with the tenant rather than the landlord, awareness of this issue may help landlords anticipate concerns or questions further down the line. As the Renters’ Rights Act approaches, careful compliance, good record‑keeping and an understanding of its wider consequences will be essential for landlords navigating the new regime.