UK Property 24 - Premiums for the grant of a lease

If your property rental business income includes premiums paid for the grant of a lease and other lump sum payments etc given in connection with the right to possession of a property, these payments are taxable on a special basis.

Broadly for leases over 50 years HMRC treat the entire premium as a capital receipt and therefore not part of your business income. Do not include this here.

For leases up to 50 years HMRC treats the premium as partly capital and partly income; only the income is included here.

If you have assigned a lease without requiring payment there may still be a premium charge. Contact your tax office if you are not sure if this affects you.

Any premiums for the grant of a lease forms part of your income if you’re claiming property income allowance.