Uproar over Welsh Land Transaction Tax hike
- Published: Tuesday 22 December, 2020
- By: Commercial Trust
A shock 1% increase in the Welsh equivalent of stamp duty on second homes, came into effect days before Christmas.
The Land Transaction Tax (LTT) is the Welsh equivalent of Stamp Duty Land Tax (SDLT) and has a temporary reduction, similar to the Stamp Duty holiday.
LTT is not payable if you are buying your “main property” and it costs less than £250,000. This threshold is usually at the lower sum of £180,000.
Properties over £250,000 pay LTT, based on the value of the property and second properties carry a higher rate.
In the same announcement, the Welsh Government confirmed that the LTT holiday would be in place until the 31st of March 2021.
What does the change mean?
When buying a house in Wales, if LTT applies, it is either at a higher or main rate.
The main rate currently applies if are buying your “main” property, and it is priced over £250,000. The rate varies between 5% and 12% depending on the price of the property.
The higher rate applies on any additional homes that exceed £40,000.
These rates start at 4% up to the property price of £180,000. Prior to the 22nd of December, this rate was 3%.
The Welsh Government has announced that only properties that have completed before the 21st of December 2020 can take advantage of the lower rate.
This has left some people, who were in the middle of a chain, requiring an extra 1% with little to no warning.
NRLA deputy policy director John Stewart comments:
“It is simply unacceptable to increase the rate of Land Transaction Tax in this fashion.”
“This increase will destabilise the private rental market in Wales, increasing costs on buying homes with immediate effect.”
“Anyone buying a new home, before they can sell their current principle residence, will have to find this extra money up front.”
“This may also cause some transactions to collapse and cause further hold-ups for anyone caught in a chain.”
Solicitors are already under a great degree of pressure, as people try to complete ahead of the LTT/SDLT holiday end date. Speaking on their behalf, president of the Law Society of England and Wales, David Greene, said solicitors were dismayed:
“These last-minute changes come at a time when solicitors are under enormous pressure, facing the challenge of operating in a pandemic – with Wales just having adopted stricter measures – and working all hours dealing with the usual Christmas rush, clients wishing to move before the 31 March land transaction tax holiday deadline and record numbers of transactions, which are being hit by delays in searches.
“They now have clients who face paying thousands of pounds more if they are unable to proceed with their transaction within the very short notice period given.”
Why the change?
The announcement comes as the Welsh Government are deciding budgets for 2021 and beyond.
The amount of support that the Welsh Government will receive from the UK will be down from £5bn to just £766m.
The money raised from the extra 1% LTT will be used to help raise £13m for social housing.
This information should not be interpreted as financial advice. Mortgage and loan rates are subject to change.