All About Stamp Duty in Wales 2020 update
Stamp duty in wales is called Land Transaction Tax (LTT). This tax applies to people who buy or take leasehold on land and property in Wales. This new stamp duty system was introduced in 2018, making Wales different from the rest of the UK. The new system has different tax rates and also operates differently from other Stamp Duty Systems in the Region. The fact that property prices remain low even after the introduction of the LTT system shows that most property buyers in Wales don’t pay the Land Transaction Tax.
LTT rates in Wales
Currently, you only have to pay the LTT if you purchase a residential property worth £180,000 and above. LTT for the purchase of non-residential land and property is £150,000. Each band has its percentage charge rate as follows:
0% SDLT Rate for a property value below £ 180000
3.5% SDLT Rate for a property value above £ 180000 up to £ 250000
5% SDLT Rate for a property value above £250 000 up to £400000
7.5% SDLT Rate for a property value above £400000 up to £750000
10% SDLT Rate for a property value above £ 750000 up to £1500000
12% SDLT Rate for a property value over £1500000
For example, if a person buys a property worth £240000, the LTT amount to pay will be 0% for the first £ 180,000 and 3.5% for the next £60000. So the total LTT will be £3100. You can quickly get these figures using a Transaction Tax Calculator.
LTT for Buy to Let and Second Homes
People who are buying property and already own one or more residential property have to pay higher rates. Remember that the LTT rates for the first property are to give first-time buyers a fair deal when buying property. The 0% rate for amounts below £180000 ensures that the average buyer doesn’t pay LTT for their first residential property. The rate for second property purchases are as follows:
3% % SDLT Rate for property value up to £ 180000
6.5% SDLT Rate for a property value above £ 180000 up to £ 250000
8% SDLT Rate for a property value above £250 000 up to £400000
10.5% SDLT Rate for a property value above £400000 up to £750000
13% SDLT Rate for a property value above £ 750000 up to £1500000
15% SDLT Rate for a property value over £1500000
Note that the higher LTT rates will only apply if you buy a property worth more than £40,000. These higher LTT rates for residential property also apply for companies and trusts.
LTT for First Time Buyers
Unlike other parts of the UK, First-time buyers in Wales do not get any relief from LTT. The LTT system is different from the Stamp Duty system of England and the LBTT system in Scotland as they give first-time buyers a tax reduction.
Despite the lack of a tax reduction, first-time buyers in wales do not pay more than other regions because the LTT threshold and the average property prices are lower than in England. The 0% rate for the property below £180000 also cushions most first time buyers from paying LTT.
The rate for Non-Residential Property in Wales
People who purchase land and property for business purposes like offices and shops pay LTT as follows:
0% SDLT Rate for property value up to £ 150000
1% SDLT Rate for a property value above £ 150000 up to £ 250000
5% SDLT Rate for a property value above £250 000 up to £1000000
6% SDLT Rate for a property value above £1000000
Differences between Stamp Duty and LTT
Unlike LTT, where you start paying 3.5% for anything over the value of £ 180,000, the value in England is set at a lower amount of £125, 000. First-time buyers in the Stamp Duty system are also exempted from paying the tax as long as they are purchasing a property worth £500000 or less. Stamp duty is also a banded tax, but there are differences in SDLT as follows:
Nothing for a property value less than £ 125000
2% Rate for a property value between £ 125000 and £ 250000
5% Rate for a property value between £250 001 and £925000
10%Rate for a property value between £925,001 and £1.5 million
12% for any property value above £1.5 million
If we use the same example of property worth £240000, the buyer will pay nothing on the first £125000 but will pay 2% for the next £115000. So the total stamp duty amount owed will be £2300. This amount will not apply if the person is a first-time buyer in England, but it will apply if the system used is the LTT system in Wales. These differences can be at times confusing, hence the need to check whether you are liable to pay or not.
LTT Frequently Asked Questions
Should we expect future Changes in LTT?
The Welsh Government can revise their LTT rates if there is a change in the Stamp Duty System in England. It is more likely that they will mirror any changes to Stamp Duty in England. Changes in tax rates and bands for Land transaction tax in Wales are done by the Welsh Government and Approved by the National Assembly. It is therefore important use the latest LTT calculators.
When is One Eligible for an LTT Refund?
People who buy a new house while still in possession of their old house pay the higher LTT rates meant for those purchasing a second home. Such people can, however, claim for a refund for the higher LTT rate paid if they sell the old house within three years after purchasing their new home. The refund you receive is the difference between the higher rate you paid and the normal rate amount for people buying a new home.
When Should One Pay LTT?
The general rule is that property buyers should pay LTT within 30 days after purchasing a property. The solicitor transacting on your behalf will file the Land Transaction Tax Return for you and pay the LTT to the Welsh Revenue Authority.