Finance News

First Tax Introduced by Welsh Government in almost 800 Years: LTT

Em Morley - March 27, 2018

The new Land Transaction Tax (LTT) in Wales is the first tax to be introduced by a Welsh Government in almost 800 years. From 1st of April 2018, the new LTT rates and bands will replace Stamp Duty Land Tax (SDLT).

These changes to the legislation in Wales aim to simplify the tax system and make it fairer, improve its efficiency as well as focus on Welsh needs and priorities. It seems the new LTT rates are more progressive; around 90% of homebuyers in Wales will either pay the same, or less tax, and 80% of first-time buyers will pay no tax at all.

What are the new LTT rates and bands?

For residential property transactions, the new rates and bands will apply, as displayed below;

Price Threshold

Main Residential Rates

£0 – £180,000

0%

£180,000 – £250,000

3.5%

£250,000 – £400,000

5%

£400,000 – £750,000

7.5%

£750,000 – £1.5m

10%

£1.5m +

12%

As of January 2018, according to data from The Principality Building Society, the average house price in Wales was £179,855. Coming in at just under the lower price threshold, this means buyers of lower value properties will pay less LTT than they would have done for SDLT.

The average house price in Wales comes in at just under £180,000

The average house price in Wales comes in at just under £180,000

Mark Hayward, Chief Executive, NAEA Propertymark comments on the new LTT bands in Wales, “We’re pleased that the Welsh Government has listened to our proposals and next week will be introducing new land transaction tax (LTT) bands in Wales; house buyers will really feel the difference of these changes.

“For buyers at the lower end of the market, the new bandings mean they won’t pay any land transaction on properties worth up to £180,000; this is the value of the average house price in Wales.”

What could this mean for Wales?

As Hayward points out, it seems Welsh homebuyers will feel the benefits of the new system. With properties of £250,000 and less, the rate of 3.5% will still be less with the new LTT compared with SDLT, and properties of up to £400,000 will see no change.

It also remains to be seen as to whether the £1,100 tax saving on a £180,000 property will really make a difference to buyers. However, the new legislation does seem a step in the right direction – with these new rates, Wales will have the highest starting threshold for property tax in the UK. Improving the market for first time buyers could help many more get on the property ladder.

The changes do however put Wales at the top for the most expensive place to buy larger and non-residential property. It could be that developers of large commercial properties, such as build to rent developments, might be put off due to a tighter profit margin.