Welsh Land Transaction Tax Changes

Across the UK each devolved Government levies a tax on property purchases which is paid by the buyer of the property. In England this is called Stamp Duty Land Tax (SDLT) or stamp duty for short, in Scotland it is called the Land and Buildings Transaction Tax (LBTT) and in Wales it is called the Land Transaction Tax. In this article we will take a look at the recent changes to the Welsh Land Transaction Tax and what these changes mean for a property buyer.

Before the changes came into force, to put the changes in context, the bands and rates for the purchase of a property when no other properties are owned were:

  • The portion up to and including £180,000 – 0%
  • The portion over £180,000 up to and including £250,000 – 3.5%
  • The portion over £250,001 up to and including £400,000 – 5%
  • The portion over £400,001 up to and including £750,000               – 7.5%
  • The portion over £750,001 up to and including £1,500,000 – 10%
  • The portion over £1,500,001 – 12%

If the buyer already had a property and was buying further properties the higher residential rates were applicable and this added 4% to each band. So, for the portion up to £180,000 the rate was 4% and the portion over £180,000 up to and including £250,000 the rate was 7.5% and so on, adding 4% to each band.

If we put this into cold hard cash numbers, for the purchase of a property costing £350,000 as a first or only residential property, under the previous rules the LTT payable would have been £7,450  made up of £0 for the first £180,000, £2,450 for the portion between £180,000 and £250,000 and £5,000 for the portion between £250,000 and £350,000.

If the purchase was for a second property, the tax payable would have been: £21,450 made up of £7,200 for the first £180,000, £5,250 for the portion between £180,000 and £250,000 and £9,000 for the portion between £250,000 and £350,000.

From the 10th October 2022 these rates for purchasing a first or only property changed to the following:

  • The portion up to and including £225,000 – 0%
  • The portion over £225,000 up to and including £400,000 – 6%
  • The portion over £400,000 up to and including £750,000               – 7.5%
  • The portion over £750,000 up to and including £1,500,000 -10%
  • The portion over £1,500,000 – 12%

There are now fewer bands and the bands cover different purchase price ranges. It can be seen that there is zero tax to pay, now up to £225,000.

If we delve a little deeper, though and do the same calculation for the same purchase as for the previous rates, it can be seen that the amount of tax, in that bracket actually increases: The total tax payable is £7,500 made up of £0 for the first £250,000, £7,500 for the portion between £225,000 and £350,000.

For the higher rate tax to total tax payable now is still £21,450 made up of £7,200 for the first £180,000, £5,250 for the portion between £180,000 and £250,000. In essence the higher rate taxes have not changed in the recent changes.

The recent changes to LTT in Wales have reduced the number of price bands over which the tax is applied and changed the rates. This has led to a reduction in the tax paid for properties below £350,000 but a small increase on the tax paid for properties above £345,000. The Welsh Government has a great on-line LTT calculator on their website to help you calculate the tax you will need to pay on your purchase.