The Land Transaction Tax (LTT) has been active since 1 April 2018 and replaced the Stamp Duty Land Tax (SDLT) in Wales. Just like the SDLT, it is payable when you purchase a building over a certain price. The rates are tiered meaning you pay different rates depending on how much the house is worth.
This new tax, managed by the Welsh Revenue Authority, may affect house buyers and businesses including builders, property developers and agents, such as the solicitors that are involved with the house buying process. The LTT also applies if you transfer land or property in exchange for payment, such as buying a share in a house.
What are the new Tax Bands?
The LTT only needs to be paid on homes worth £180,000 or more, unless it isn’t your main residential home, then you pay 3% extra.
There are separate bands for residential properties and non-residential properties. Any companies that purchase a residential property will need to pay a higher rate of LTT, which is 3% on top of the main residential rates.
Tax bands for residential properties:
| Property Price | Tax to Pay |
| £1-£180,000 | 0% |
| £180,001-£250,000 | 3.5% |
| £250,001-£400,000 | 5% |
| £400,001-£750,000 | 7.5% |
| £750,001-£1.5m | 10% |
| £1.5m or more | 12% |
Tax bands for non-residential properties:
| Property Price | Tax to Pay |
| £0-150,000 | 0% |
| £150,001-£250,000 | 1% |
| £250,001- £1m | 5% |
| £1m or more | 6% |
What are the main differences between the LTT and Stamp Duty?
- The threshold before LTT needs to be paid increased from £125,000 to £180,000. This is for everyone and not just first-time buyers.
- The SDLT rates meant that first-time buyers didn’t have to pay SDLT on purchases up to £300,000, however, this relief is no longer available under the LTT system.
- There is a new main general anti-avoidance rule (GAAR).
- There is also a targeted anti-avoidance rule (TAAR) applicable to all reliefs. This now stops a relief from being claimed where the transaction is part of a ‘tax avoidance agreement’.
Do I pay the same amount of tax if I want a second property?
No, you currently pay 3% more LTT on your second property in Wales, which is the same as Stamp Duty Land Tax in Wales. If you sell your old residence within three years of buying your new property, you will still be able to claim back the higher rate of tax, however now you’ll have four years to claim it back.
This article was written and contributed by Howells Solicitors
DISCLAIMER: This article should not be regarded as constituting legal advice in relation to particular circumstances and is merely a general comment on the relevant topic. If specific advice is required in connection with any of the matters covered in this article, please speak to Howells Solicitors directly.