The Welsh Government has released the new Land Transaction Tax regulations, which change the Land Transaction Tax rates across Wales.
On 8th January, the Welsh Government released The Land Transaction Tax (Tax Bands and Tax Rates) (Wales) Regulations 2018, which set out the new rates.
|LTT Residential Rates|
Notably, the starting rate of tax is far higher than the starting rate of tax in England – which is currently set at £125,000.
The Welsh Government wants the rates to be ‘progressive’, and to assist first time buyers in Wales. But, because the Westminster budget scrapped, SDLT for first time buyers under £300,000, those purchasing properties over £180,000 in Wales may be disheartened with having to pay substantially more tax.
As mentioned in our previous blog, purchasers of an additional residential property will still have to pay an additional 3% of LTT , in line with the current rates. Relief will be available on the additional rate if you’re replacing a main residence. You’ll be able to claim a refund of the higher rate if your old residence is sold within 3 years of buying your new property.
|Over £1 million||6%||5%|
These LTT rates mean that Wales will now have the lowest starting rate of tax for the purchase of business premises in the UK. But, the extra 1% tax on property over £1 million has been subject to some criticism.
Ian Prince, Director of CBI Wales, believes that this will make ‘commercial purchases more expensive, and may impact on the flow of investment and capital into Wales.’ The Welsh Government’s Welsh Tax Policy Report states that they’ve introduced the higher band to maintain revenues. It’ll be interesting to see whether commercial property investors will be put off investing in Wales by the extra cost.
The Welsh Government have commented that the introduction of LTT is to ‘make it fairer; improve its efficiency and effectiveness; and to focus on Welsh needs and priorities.’
Devolution of the tax system is a significant step for Wales. But, will the change in banding for LTT will adversely affect the Welsh market, both in residential and commercial property transactions?
Watch this space.