On a right to buy purchase, Stamp Duty Land Tax is charged on the discounted price the tenant actually pays, not on the market value of the home. The discount the tenant may have to repay on an early resale is ignored, because Schedule 9 to the Finance Act 2003 takes contingent consideration out of the charge for these transactions.

Which purchases count as right to buy transactions?

Schedule 9 paragraph 1(2) defines a right to buy transaction as either:

  • the sale of a dwelling, or the grant of a lease of a dwelling, at a discount by a relevant public sector body, or
  • a sale or lease grant in pursuance of the preserved right to buy, where a council home was transferred to another landlord while the tenant lived there and the tenant keeps the right.

The list of relevant public sector bodies in paragraph 1(3) is long. It includes local housing authorities, county councils in England, the Northern Ireland Housing Executive, non profit registered providers of social housing, registered social landlords, housing action trusts, new town development corporations and police bodies. What counts is who the seller is and that the sale is at a discount, so discounted sales by a housing association can qualify as well as council sales.

SDLT applies in England and Northern Ireland only. Purchases in Scotland and Wales fall under Land and Buildings Transaction Tax and Land Transaction Tax, and the right to buy itself has been abolished in Wales.

What price is the tax charged on?

The chargeable consideration is the price paid after the discount. HMRC’s manual at SDLTM27015 is explicit that the intention of paragraph 1 is to tax the actual consideration paid at the effective date, that the market value of the property is not used to calculate the liability, and that market value should not be entered anywhere on the SDLT return.

In England the discount depends on the type of home, its value, the region and how long the buyer has been a public sector tenant. GOV.UK sets the discount for houses at 35% after three to five years as a public sector tenant, rising by 1% a year after that, and for flats at 50% rising by 2% a year, subject to a cap of the lower of 70% of value and a regional maximum. For applications from 21 November 2024 the regional maximums range from £16,000 in London to £38,000 in the South East, with local exceptions. Whatever the discount, SDLT follows the reduced figure.

Where the seller is a registered provider that receives a government grant to cover the cost of the discount, paragraphs 1(6) and 1(7) stop that grant counting as part of the buyer’s consideration, even though it is paid in connection with the sale.

Why is the discount repayment ignored?

Normally section 51 of the Finance Act 2003 requires contingent consideration to be included on the assumption that the contingency will happen. A contingent amount is one payable only if an uncertain future event occurs.

A right to buy buyer in England who sells within five years must repay some or all of the discount: all of it in the first year, then 80%, 60%, 40% and 20% in years two to five, based on the value at the time of sale. Without a special rule, that obligation could be treated as extra contingent consideration. Schedule 9 paragraph 1(1) prevents this. It disapplies section 51 and provides that any consideration payable only if a contingency occurs, or because one has occurred, is not chargeable consideration.

The practical effect is that the buyer is never taxed on the discount, whether or not it is later repaid. Section 80, which normally requires a further return when a contingency is resolved, applies only where section 51 applies, so repaying the discount on an early sale does not reopen the original SDLT return.

What about deferred payments and rent to mortgage?

The relief covers contingent amounts, not amounts that are simply paid later. Schedule 4 paragraph 3 says consideration is valued without any discount for postponement, so any part of the agreed price that is certain but deferred is chargeable in full on the effective date.

Schedule 9 paragraph 6 contains a separate rule for rent to mortgage transactions under Part 5 of the Housing Act 1985, where the tenant paid only part of the price initially. The chargeable consideration is the full price that would be payable under section 126 of that Act if the tenant were exercising the ordinary right to buy. In other words the deferred element is taxed at the outset, at the discounted right to buy price. An equivalent rule in paragraph 6(4) and (5) covered the Scottish rent to loan scheme.

Do the higher rates and first time buyers’ relief apply?

Schedule 9 changes only the amount of consideration. It does not switch off the rest of the SDLT code, so the normal rate rules are applied to the discounted price:

  • Higher rates. If the buyer, or anyone buying with them, will own another residential property worth £40,000 or more at the end of the day of completion and is not replacing a main residence, the 5% surcharge applies to the whole price. Right to buy applications can include up to three family members who have lived with the tenant for 12 months, and GOV.UK confirms that if any joint buyer has to pay the higher rates, the whole transaction is charged at those rates.
  • First time buyers’ relief. Schedule 9 contains first time buyer provisions only for shared ownership, not for right to buy. A buyer who meets the conditions in Schedule 6ZA paragraph 1, including that every buyer is a first time buyer intending to live there and the price does not exceed £500,000, can claim the relief in the normal way.

How does this work in practice?

Illustration only. Priya has rented a council house in the South West for ten years. It is valued at £200,000. Her percentage discount is 40%, which would be £80,000, but the South West cap is £30,000, so she pays £170,000.

Buyer’s position Calculation on £170,000 SDLT
Has never owned a home First time buyers’ relief, 0% up to £300,000 £0
Has owned before, no other property now 0% on £125,000, 2% on £45,000 £900
Her son joins the purchase and owns a flat 5% on £125,000, 7% on £45,000 £9,400

In each case the £200,000 market value is irrelevant. If Priya sells in year three and repays part of the discount, nothing further is due to HMRC on the purchase.

How is the return completed?

A return must be filed and any tax paid within 14 days of completion. SDLTM27015 says relief code 22 is used for right to buy, the consideration box shows the price actually paid, and market value is left off the form. A return is needed to claim a relief even when no tax is due. Where the purchase is the grant of a lease, as is usual for flats, the premium is the discounted price and any rent is dealt with under the normal lease rules.

What mistakes are common?

  • Entering the valuation figure. Using the landlord’s valuation instead of the discounted price overstates the tax.
  • Forgetting family members’ property. A relative added to the application to help with the mortgage can bring the whole purchase into the higher rates if they own another home.
  • Assuming a later sale gets the same treatment. When the former tenant sells, the seller is no longer a relevant public sector body, so the next buyer pays SDLT on the full price in the normal way.
  • Confusing right to buy with shared ownership. Shared ownership leases have their own regime in Schedule 9, covered in SDLT on shared ownership.

For the surcharge rules see SDLT higher rates for additional dwellings, and for the relief conditions see SDLT first time buyer relief. How contingent and deferred amounts are treated outside right to buy is explained in what counts as consideration for SDLT.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.