Short-lease premium (UK property income)
When a landlord receives a premium for granting a lease of 50 years or less, a statutory part is treated as property income. For a simple whole-year lease, the income element is the premium multiplied by (50 minus the number of complete years after the first)/50. The effective lease duration and particular statutory conditions must be checked. A qualifying trader tenant may obtain a separate deduction spread over the lease, subject to its own conditions.
Worked example
A landlord grants an 11-year lease in 2025–26 for a £55,000 premium, with no complicating conditions. Ten complete years follow the first, so the income element is £55,000 × (50 − 10)/50 = £44,000. If the statutory tenant deduction is available evenly over all 11 years, its annual amount is £4,000.
Common mistake
Subtracting 2% for every year including the first, or assuming the tenant’s deduction is the entire premium.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |