Update on Land Transaction Tax
Reasons to choose Wilson Browne
The Welsh Government has announced changes to the main residential rates and bands of land transaction tax. The new rates and bands apply to transactions with an effective date on or after 10th October 2022.
From 10th October 2022 the following applies:
- the starting threshold for paying the main residential rates of land transaction tax (LTT) increases from £180,000 to £225,000; and
- the first tax band will cover transactions from £225,000 to £400,000, taxed at 6% on the amount over £225,000.
The changes have been introduced earlier than planned as a result of changes to stamp duty land tax (SDLT) in England and Northern Ireland.
Whilst the starting threshold for LTT has increased, the previous 3.5% and 5% LTT main residential rate bands have been replaced by a single, tighter 6% band. This means that from 10th October, the amount of LTT payable on a house purchase will be lower on purchases below £345,000, but higher where the value exceeds £345,000. Around 15% of property transactions in Wales currently exceed £345,000.
| Price threshold | LTT main residential rate for transactions with an effective date from 1st July 2021 to 9th October 2022 | LTT main residential rate for transactions with an effective date on or after 10th October 2022 |
| The portion up to and including £180,000 | 0% | 0% |
| The portion over £180,000 up to and including £225,000 | 3.5% | 0% |
| The portion over £225,000 up to and including £250,000 | 3.5% | 6% |
| The portion over £250,000 up to and including £400,000 | 5% | 6% |
| The portion over £400,000 up to and including £750,000 | 7.5% | 7.5% |
| The portion over £750,000 up to and including £1,500,000 | 10% | 10% |
| The portion over £1,500,000 | 12% | 12% |
Price threshold LTT main residential rate for transactions with an effective date from 1st July 2021 to 9th October 2022 LTT main residential rate for transactions with an effective date on or after 10th October 2022
Price threshold LTT main residential rate for transactions with an effective date from 1st July 2021 to 9th October 2022 LTT main residential rate for transactions with an effective date on or after 10th October 2022
It is estimated that following the increase in the LTT threshold, 61% of homebuyers in Wales will not pay LTT on their purchase. The LTT rates and bands for higher residential rate and non-residential transactions are unchanged from those effective from 22nd December 2020. This means that, unlike SDLT in England and Northern Ireland, the benefit of the increased starting threshold does not apply to those purchasing second homes in Wales.
Posted:
Jenny Woodruff
Partner
Jenny is a Partner and head of the Residential Conveyancing Team. She has extensive knowledge of the conveyancing process, including: dealing with freehold and leasehold sales & purchases; new build purchases; remortgages; transfers of equity; shared ownership; help to buy transactions & general property advice.