Ducted fan based vertical lift systems are excellent candidates to be in the group of the next generation vertical lift vehicles, with many potential applications in general aviation and military missions. Although ducted fans provide high performance in many “vertical take-off and landing” (VTOL) applications, there are still unresolved problems associated with these systems. Fan rotor tip leakage flow adversely affects the general aerodynamic performance of ducted fan VTOL unmanned aerial vehicles (UAVs). The current study utilized a three-dimensional Reynolds-averaged Navier–Stokes (RANS) based computational fluid dynamics (CFD) model of ducted fan for the development and design analysis of novel tip treatments. Various tip leakage mitigation schemes were introduced by varying the chordwise location and the width of the extension in the circumferential direction. Reduced tip clearance related flow interactions were essential in improving the energy efficiency and range of ducted fan based vehicles. Full and inclined pressure side tip squealers were also designed. Squealer tips were effective in changing the overall trajectory of the tip vortex to a higher path in radial direction. The interaction of rotor blades and tip vortex was effectively reduced and the aerodynamic performance of the rotor blades was improved. The overall aerodynamic gain was a measurable reduction in leakage mass flow rate. This leakage reduction increased thrust significantly. Experimental measurements indicated that full and inclined pressure side tip squealers increased thrust obtained in hover condition by 9.1% and 9.6%, respectively. A reduction or elimination of the momentum deficit in tip vortices is essential to reduce the adverse performance effects originating from the unsteady and highly turbulent tip leakage flows rotating against a stationary casing. The novel tip treatments developed throughout this study are highly effective in reducing the adverse performance effects of ducted fan systems developed for VTOL UAVs.