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Update on Welsh Land Transaction Tax

Update on Welsh Land Transaction Tax

Hannah McCartan
2nd February 2018

The first Welsh-only tax in over 800 years; Welsh Land Transaction Tax (LTT) will replace Stamp Duty (SDLT) from 1st April 2018.

Back in September, the Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Bill was introduced to the National Assembly for Wales. According to the Welsh Government, the change means that 9 out of 10 buyers will pay the same or a lesser amount of tax.

The new rates will see stamp duty exemption extended from properties worth £125,000 to properties worth £150,000 and above. The 3 % surcharge on second homes will still apply, but from the new banding.

The Welsh Housing Market

Until 1st April 2018, Stamp Duty will still apply and at the current rates, meaning that until then, 9 out of 10 buyers could be paying more tax now whilst they wait for the new tax to come in.

This could mean the housing market stagnates in Wales at the start of the year as would-be purchasers wait for the changes to come in before purchasing.

If you are thinking of buying a property, you can check this Stamp Duty calculator to see if you are affected: Stamp Duty Calculator

The Current STLT Band vs New LTT

The current rates:

  • Up to £125,000, no tax
  • Between £125k and £250k, 2% tax
  • Between £250k and £925k, 5% tax
  • Between £925k to £1.5m, 10% tax
  • Above £1.5m, 12% tax

The new rates in Wales:

  • Up to £150,000, no tax
  • Between £150k and £250k, 2.5% tax
  • Between £250k and £400k, 5% tax
  • Between £400k and £750k, 7.5% tax
  • Between £750k to £1.5m, 10% tax
  • Above £1.5m, 12% tax

The new rates for 2nd properties in Wales

  • Between £40,000 and £150,000, 3% tax
  • Between £150k and £250k, 5.5% tax
  • Between £250k and £400k, 8% tax
  • Between £400k and £750k, 10.5% tax
  • Between £750k to £1.5m, 13% tax
  • Above £1.5m, 15% tax

What This Means

The tipping point is properties on the market for £135,000 and above.

Currently, the Stamp Duty due on a property of this price would be £200. After 1st April 2018, the tax due will be £0.

Go up to £150,000 and the saving becomes £500, which would be incentive enough for most people to wait until after 1st April 2018 to buy their next home.

It is only for properties priced £200,000 and over that the tax difference starts to minimise again.

Property Investment in Wales

Savvy property investors in Wales will be looking at the cost difference, too. Even though the 3% surcharge will still apply, they will still benefit from waiting until 1st April 2018 to purchase.

Recent changes to Stamp Duty for second home owners have already sent shockwaves through the property market.

Investment Opportunities

It’s possible that this will mean some opportunity for investors to purchase property in Swansea. Many unsuspecting sellers are going to be caught up in this, and may decide to get ahead of a potential stagnation by reducing asking prices now. Looking at properties that have already been on the market a while in these price categories could be a starting point.

Keep an eye out!

If you are thinking of buying a property in Swansea to let and would like the benefit of a free 30 minute consultation on where the best places to buy are, give us a call on 01792 430100, or drop us an email.

Related: New Welsh Tax Puts 429 Properties at Risk of Not Selling / Incorporated Landlords to Pay More Tax

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