Guidance on Stamp Duty Land Tax for Right to Buy Transactions

SDLT on Right to Buy Purchases

For a qualifying right to buy or preserved right to buy purchase, Stamp Duty Land Tax is worked out using the discounted price the tenant actually pays, not the property’s market value. Any future obligation to repay discount on an early resale is not treated as extra consideration for SDLT on the original purchase.

• SDLT is charged on the actual purchase price paid after the right to buy discount has been applied.
• The property’s open market value is not used for SDLT if the transaction qualifies under the right to buy rules.
• The same treatment can apply to preserved right to buy purchases if they fall within the relevant legal definition.
• A possible repayment of discount if the property is sold within the repayment period does not increase the SDLT due at the time of purchase.
• This special treatment only applies where the sale is made by a public body covered by the legislation and the transaction genuinely falls within the right to buy regime.
• When completing the SDLT return, the actual consideration should be entered, not the market value, and the right to buy relief code is 22.

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SDLT on right to buy purchases: tax is based on the discounted price, not market value

This page explains how stamp duty land tax (SDLT) applies when a tenant buys a property under the right to buy scheme, including a preserved right to buy. The key point is simple but important: SDLT is charged by reference to the price the tenant actually pays, after the right to buy discount, and not by reference to the property’s market value.

What this rule is about

Right to buy allows certain public sector tenants to buy their home at a discount, usually linked to how long they have occupied it. That discount creates an obvious SDLT question: should tax be calculated on the full market value of the property, or on the reduced amount the tenant actually pays?

The source material explains that special SDLT rules apply to these transactions. Those rules are intended to make sure SDLT follows the real purchase price paid by the buyer at the effective date of the transaction.

The source also deals with another feature of right to buy purchases: if the buyer sells on within a specified period, there may be an obligation to repay some or all of the discount. Without special treatment, that kind of possible future repayment could raise difficult SDLT issues as contingent consideration. The legislation disapplies that result for these transactions.

What the official source says

The official material says that, for a qualifying right to buy purchase, SDLT is charged on the actual consideration paid by the purchaser. The market value of the property is not used to calculate the SDLT liability.

It also says that the relevant relief in Schedule 9 to the Finance Act 2003 disapplies section 51 of that Act. The practical effect, as explained in the source, is that SDLT is not charged on contingent consideration that might otherwise arise because the buyer may have to repay discount if the property is resold within the discount repayment period.

The relief applies to sales at a discount by the public bodies defined in the legislation. The source makes clear that this relief is directed at the potential repayment element to the vendor. It does not change the basic point that SDLT is calculated on the amount actually paid by the buyer.

The same SDLT treatment applies where the buyer has a preserved right to buy, provided it falls within the relevant definition used for that scheme.

The source also gives form-filling guidance for SDLT1. It says the right to buy relief code is 22, and that the return should show the actual consideration paid by the purchaser. The market value should not be entered on the form.

What this means in practice

If a tenant buys under right to buy at a discount, you do not start with the full open market value and then try to adjust it. The starting point is the discounted purchase price the tenant is actually obliged to pay.

That matters because right to buy discounts can be substantial. If SDLT were based on market value, the tax cost could be much higher. The source confirms that this is not how the SDLT rules work for qualifying transactions.

The discount repayment rules also do not increase the SDLT charge at the outset. A possible future obligation to repay discount on an early resale is not treated, for these purposes, as additional chargeable consideration on which SDLT must be paid when the property is first bought.

In practical conveyancing terms, the person preparing the SDLT return should focus on:

• whether the purchase is genuinely a right to buy or preserved right to buy transaction within the relevant rules,
• the actual amount paid by the tenant at completion or other effective date, and
• whether the seller is one of the public bodies covered by the legislation.

If those conditions are met, the market value should not be substituted into the SDLT calculation simply because the property is worth more than the amount paid.

How to analyse it

A sensible way to approach a right to buy SDLT question is to work through these points in order.

First, identify the nature of the transaction. Is this an ordinary purchase at undervalue, or is it a statutory right to buy or preserved right to buy acquisition? That distinction matters. The special SDLT treatment described in the source is tied to these specific schemes.

Second, identify the seller. The source refers to sales at a discount by public bodies defined in Schedule 9. The relief is not a general rule for any discounted sale by any seller.

Third, establish the actual consideration paid by the buyer at the effective date of the transaction. This is the figure the source says should be used for SDLT.

Fourth, check whether there is a discount repayment period. The source notes that if the property is resold within the relevant period, currently stated there as five years, an amount may become payable back to the original body. For SDLT on the original acquisition, the source says this potential repayment is not brought in as contingent consideration because of the statutory disapplication.

Fifth, ensure the SDLT return reflects that treatment. The source says the actual consideration should be entered, tax should be calculated on that amount, and market value should not appear on the form.

Example

Illustration: a qualifying tenant buys a council property under right to buy. The flat is worth more on the open market, but because of the tenant’s statutory discount the amount actually paid is lower. On the source material’s approach, SDLT is worked out using the discounted amount actually paid, not the higher market value.

If the tenant later sells within the discount repayment period and has to repay some discount to the former landlord, that possible repayment does not mean SDLT should originally have been charged on a higher figure as contingent consideration.

Why this can be difficult in practice

The main difficulty is classification. Not every discounted acquisition is a right to buy acquisition for SDLT purposes. The source is dealing with a specific statutory context involving defined public bodies and, in some cases, preserved right to buy. If the facts fall outside that framework, the SDLT treatment may be different.

Another practical difficulty is separating the housing-law position from the SDLT position. The amount of discount available, and the circumstances in which discount must be repaid, are determined under the right to buy regime. The SDLT question is narrower: what counts as chargeable consideration on the effective date, and whether the special statutory rule applies.

There can also be confusion because the property may plainly be worth much more than the amount paid. In many tax contexts, undervalue transactions raise market value issues. The source makes clear that, for qualifying right to buy transactions, the legislation is intended to prevent that outcome here.

Key takeaways

• For a qualifying right to buy or preserved right to buy purchase, SDLT is based on the amount the buyer actually pays, not the property’s market value.
• A possible future repayment of discount on an early resale is not charged as contingent consideration on the original purchase.
• The special treatment depends on the transaction falling within the right to buy rules and involving the relevant defined public body.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guidance on Stamp Duty Land Tax for Right to Buy Transactions

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