Land Transaction Tax “Holiday” Announced
The Welsh Government charges Land Transaction Tax (“LTT”) on the purchase of property in Wales. The rates of LTT are different to both Stamp Duty Land Tax charged in England and Land and Buildings Transaction Tax in Scotland with the starting LTT threshold for residential property at £180,000.
The Welsh Government Finance Minister announced on 14 July that the starting rate threshold for LTT would be increased to £250,000 but it would only apply to transactions from 27 July 2020 and end on 31 March 2021. The 27 July date has been chosen as it is the date when it is expected that viewings of occupied properties will be permitted by Welsh Government. The maximum saving in LTT will be £2,450.
One difference in Wales compared to England and Scotland is that the increase in threshold will not apply to the purchase of additional residential properties where the existing bands will apply together with the 3% LTT surcharge.
According to the UK House Price Index for March 2020 the average price of a property in Wales was £161,684. The table below shows the differences in LTT for the purchase of a main home.
|Normal rates (no holiday)
The introduction of a LTT “holiday” or reduction for residential property is to be welcomed. Welsh Government believe that 80% of the buyers of main homes in Wales will not pay LTT as a result of the increase in threshold. However, the residential property market in Wales in relation to existing transactions will now be on hold until 27 July where buyers want to take advantage of the maximum £2,450 saving. Buyers of homes which completed between 8 July and 14 July will probably be bitterly disappointed at missing out on the LTT saving.
It is also notable that the LTT reduction only applies to the purchase of main homes and the change in threshold will not apply to additional residential properties such as holiday homes and buy-to-let properties. It remains to be seen how much of a boost to the Welsh economy will be provided by a LTT reduction of up to £2,450 per transaction.
For more information on LTT please contact Andrew Evans.