If you are a first-time buyer or you live outside Wales and want to purchase a property there, you’ll need to understand how stamp duty affects you. Both Scotland and Wales have slightly different rules and terminology when it comes to house purchases.
The first thing you need to be aware of is that the term stamp duty land tax (SDLT) has been replaced by the Land Transaction Tax or LTT.
Stamp Duty in Wales
Apart from the name, there are differences in the rates of tax that are applied and the bands that are used. There are also extra rules that relate to residential property deals that come in at the higher rates.
There are slightly tougher anti-tax avoidance measures with the LTT as opposed to the SDLT. If you are purchasing a new residential lease, the rent element is not subject to LTT whereas it is under SDLT. On the whole, however, both LTT and SDLT are reasonably well aligned.
LTT Band Rates
LTT is payable on both freehold and leasehold properties. If you are first time buyer and not purchasing a second home (for example, as a buy to let), the rates are as follows:
- Between £0 and £180,000 you pay no LTT.
- From £180,001 to £250,000 you pay 3.5% on the amount over £180,000.
- Between £250,001 and £400,000, the rate is 5%.
- Between £400,001 and £750,000, the rate is 7.5%.
- Between £750,001 and £1,500,000, the rate is 10%.
- Above £1,500,001m the rate is 12%.
If you are buying a second home or a buy to let, you will need to add 3% onto each band over a baseline value of £40,000.
For a first time buyer, purchasing a home for £280,000, for example, means they will have to pay:
- Up to £180,000 = £0
- For the next £70,000 = £2,450 at 3.5%
- For the final £30,000 = £1,500 at 5%
- Total = £3,950
If you are a first-time buyer in Northern Ireland or England, you can get stamp duty relief on properties up to £300,000. There is currently no such facility with LTT in Wales.
LTT is collected by the Welsh Revenue Authority or WRA and you need to pay it to them once the purchase of your property has been completed. Failure to do so can lead to penalties being applied.
When Is LTT Not Payable?
For most normal purchases, LTT is payable at the various bandwidths. There are a few exemptions, however. If a property is being transferred as part of a settlement for a divorce, LTT is not paid. If you have a case of joint owners who are not married or in a civil partnership transferring from one to the other, the property may be subject to LTT.
If you have been left a property in Wales under the terms of a will then you don’t pay LTT and you don’t even have to inform the WRA that you are now the owner. If you are gifted a property, however, you also don’t need to pay LTT as long as there is no mortgage outstanding. If there is a mortgage remaining, you pay LTT on the outstanding amount and not the full value of the home.
