From April 2018, the Welsh Government will replace Stamp Duty Land Tax (SDLT) with a new Land Transaction Tax (LTT).
The Land Transaction Tax and Anti-avoidance of Devolved Taxes Bill is the second of three bills that will devolve Welsh taxation to a new Welsh Revenue Authority. It will be the first time that Wales has had direct taxation since the 13th Century.
The Bill is currently under the scrutiny of the National Assembly for Wales. Assembly Members expect the 220-page document to receive royal assent by spring 2017.
How will the LTT regime differ to stamp duty?
Like SDLT, LTT will apply to the purchase or lease of land or property in Wales over a certain value. Assembly members assure Welsh taxpayers that its implementation “will be broadly consistent with SDLT”.
The Bill allows the Welsh Government to set LTT rates and bands. The government will decide on rates closer to the date of implementation “to reflect economic conditions at that time”.
What about the additional property surcharge?
Higher rates of stamp duty apply for second home buyers and many buy-to-let landlords. Landlords in Wales will wish to know whether a similar LTT surcharge will apply for transactions after April 2018.
According to the Welsh Government, whether to apply the higher rates is “under consideration”. However, the Wales Governance Centre has warned of an annual budget shortfall of £50 million if devolved taxes do not make up for cuts to the annual grant that Wales receives from the UK treasury.
Based on this, it is possible that the higher rates may remain in place to maximise tax receipts. On the other hand, abolishing the surcharge might make Wales a more competitive region for property investors and could encourage more transactions.