The Welsh Government has announced changes to the threshold for paying Land Transaction Tax (LTT), with the change coming into effect on October 10, 2022.
The update will see the threshold on paying no LTT – formerly called Stamp Duty – increased from £180,000 to £225,000. This means that anyone buying a home in Wales for less than £225,000 will pay no tax on the transaction.
The changes also include a reduction in the tax paid on any home costing less than £345,000 – up to a maximum of £1,575. However, people purchasing homes worth more than £345,000 will see an increase in the tax paid – up to £550. Homes in this price bracket represent about 15% of property transactions in Wales.
The new LTT rates in Wales will be:
- Up to and including £225,000 = 0%
- Over £225,000 up to and including £400,000 = 6%
- Over £400,000 up to and including £750,000 = 7.5%
- Over £750,000 up to and including £1,500,000 = 10%
- Over £1,500,000 = 12%
All other elements of the LTT will remain unchanged, meaning there are no tax reductions provided to those purchasing second homes in Wales, unlike with Stamp Duty Land Tax in England and Northern Ireland.
The changes have been brought forward as a response to the changes to SDLT (paid in England and Northern Ireland), announced by the UK government in last week’s ‘mini-budget’ financial statement.
Welsh Assembly Minister of Finance and Local Government, Rebecca Evans, has stated that the move is intended to ensure that the threshold for paying tax reflects the rise in the prices of homes in Wales over the last two years.
The Welsh Government has introduced the changes to address the unique needs of the housing market in Wales and contributes to its wider vision of a fairer tax system.
Under the new threshold, 61 percent of homebuyers will not pay tax on their purchase. Welsh Government hopes these changes will support people who need it and help with the impact of rising interest rates. It also aims to help people at the lower end of the housing market, particularly first-time buyers and those looking to downsize.
Buying or selling a home is by far the biggest and most important financial transaction in which the majority of people will ever be involved. Here at Hutchinson Thomas, we aim to give that transaction the importance and attention it deserves.
For informed, professional advice regarding any legal matters concerning property, contact our team on 01639 640 521.