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Wales changes from Stamp Duty to Land Transaction Tax

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Wales changes from Stamp Duty to Land Transaction Tax

Wales changes from Stamp Duty to Land Transaction Tax

Wales changes from Stamp Duty to Land Transaction Tax

Wales has switched the way it taxes the purchase of property,  stamp duty has been replaced by a new Land Transaction Tax (LTT). This could potentially make moving house more expensive.

As of the 1st April 2018, UK Stamp Duty Land Tax (SDLT) has been replaced by LTT, the new property tax is payable when people buy a house over a certain value. Read below for what prices will be affected.

Scotland replaced Stamp duty in 2015 and Wales has now followed suit

It will impact on buyers, sellers, builders, developers, removals companies agents and those involved in the transaction process such as solicitors and conveyancers.

Why the changes?

The Welsh government has stated it introduced the new form of taxation to ‘provide stability and reassurance to businesses and the property market’.

The basic elements of SDLT have has been retained, with key fundamentals such as partnerships, trusts and reliefs mirrored by the new system.

The tax has also changed to make it fairer and simpler to administer and  ‘improve its efficiency and effectiveness’ and ‘focus on Welsh needs and priorities’.

The tax is collected by the Welsh Revenue Authority (WRA), with the body providing a handy calculator on its website to allow buyers to work out how much LTT they will need to pay for Welsh transactions completed on or after April 1 2018.

The additional 3% surcharge on second homes and buy-to-let investments, introduced on April 1st 2016, will still apply as part of the new legislation. As a result, if you already own one or more residential properties you may need to pay a higher rate on your latest transaction, but if you are simply replacing your main residence these higher rates may not apply.

New tax rates and tax bands for LTT

Different tax rates and bands apply for different types of property, with all being approved by the National Assembly for Wales.

When buying a freehold residential property in Wales, the following rates will now apply to the portion of the price you pay in each band:

Up to an including £180,000 – LTT rate 0%
Over £180,000, up to and including £250,000 – LTT rate 3.5%
Over £250,000, up to and including £400,000 – LTT rate 5%
Over £400,000, up to and including £750,000 – LTT rate 7.5%
Over £750,000, up to and including £1.5 million – LTT rate 10%
Over £1.5 million – LTT rate 12%

This is not as severe as it may appear at first glance. Here’s a quick example of how the new tax rates work. If you’re purchasing a home for £300,000, you’ll pay 0% on the first £180,000, 3.5% on the next £70,000  (£2,450) and 5% on the remaining £50,000 (£2,500)– equalling a total tax bill payable of £4,950

For leasehold transactions, the same rates above will apply. However, if you are a landlord or buy-to-let buyer, you will have to pay the extra 3% surcharge in line with the rest of the UK.

Companies who purchase residential properties will have to pay the higher residential rates,  trusts buying up residential properties may also be taxed more.

The WRA tax calculator is again on hand to clear up any confusion if it exists.

Who are the winners and losers of the new tax?

According to new research, the average buyer in Wales will be £560 better off as a result of the changes. However, buyers purchasing a house worth over £402,000 will be negatively affected (and worse off) thanks to the newly introduced legislation.

Buyers in Powys will witness the biggest savings (£1,095), the research found, closely followed by Ceredigion and the Isle of Anglesey. The average buyer in these locations will save £1,088 and £1,064 respectively under LTT rules.

Savings are also significant in Wales’ biggest cities, including Cardiff (£799), Newport (£800) and Swansea (£351), as well as popular locations such as Pembrokeshire (£827), Flintshire (£853) and Wrexham (£567).

While areas where average prices are below the stamp duty threshold will witness no change (they were paying £0 before and will still be paying £0 now), second home owners will pay less with the higher rate if the property they are purchasing is below £402,000.

By contrast, higher value properties will be hit with higher taxes. A home worth £1 million, for example, will accumulate £61,200 in LTT compared to only £43,750 in stamp duty.

Will the rest of the UK follow Wales and Scotland?

It seems unlikely that the current stamp duty system in England and Northern Ireland, which was transformed as recently as December 2014, will be changing anytime soon – but the savings made by buyers in Wales and Scotland may start to ramp up the pressure on Theresa May and her government to change tack.

There has recently been an overhaul of stamp duty for first-time buyers – with the majority now paying nothing when buying their first home – but the calls have been loud for stamp duty changes or a stamp duty holiday for a number of other demographics, while the additional 3% stamp duty surcharge on second homes continues to be highly contentious more than two years after its implementation.

For now, though, the changes made in Wales are unlikely to be reflected in England or Northern Ireland.


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Wales changes from Stamp Duty to Land Transaction Tax

Wales has switched the way it taxes the purchase of property,  stamp duty has been replaced by a new Land Transaction Tax (LTT). This could potentially make moving house more expensive.

As of the 1st April 2018, UK Stamp Duty Land Tax (SDLT) has been replaced by LTT, the new property tax is payable when people buy a house over a certain value. Read below for what prices will be affected.

Scotland replaced Stamp duty in 2015 and Wales has now followed suit

It will impact on buyers, sellers, builders, developers, removals companies agents and those involved in the transaction process such as solicitors and conveyancers.

Why the changes?

The Welsh government has stated it introduced the new form of taxation to ‘provide stability and reassurance to businesses and the property market’.

The basic elements of SDLT have has been retained, with key fundamentals such as partnerships, trusts and reliefs mirrored by the new system.

The tax has also changed to make it fairer and simpler to administer and  ‘improve its efficiency and effectiveness’ and ‘focus on Welsh needs and priorities’.

The tax is collected by the Welsh Revenue Authority (WRA), with the body providing a handy calculator on its website to allow buyers to work out how much LTT they will need to pay for Welsh transactions completed on or after April 1 2018.

The additional 3% surcharge on second homes and buy-to-let investments, introduced on April 1st 2016, will still apply as part of the new legislation. As a result, if you already own one or more residential properties you may need to pay a higher rate on your latest transaction, but if you are simply replacing your main residence these higher rates may not apply.

New tax rates and tax bands for LTT

Different tax rates and bands apply for different types of property, with all being approved by the National Assembly for Wales.

When buying a freehold residential property in Wales, the following rates will now apply to the portion of the price you pay in each band:

Up to an including £180,000 – LTT rate 0%
Over £180,000, up to and including £250,000 – LTT rate 3.5%
Over £250,000, up to and including £400,000 – LTT rate 5%
Over £400,000, up to and including £750,000 – LTT rate 7.5%
Over £750,000, up to and including £1.5 million – LTT rate 10%
Over £1.5 million – LTT rate 12%

This is not as severe as it may appear at first glance. Here’s a quick example of how the new tax rates work. If you’re purchasing a home for £300,000, you’ll pay 0% on the first £180,000, 3.5% on the next £70,000  (£2,450) and 5% on the remaining £50,000 (£2,500)– equalling a total tax bill payable of £4,950

For leasehold transactions, the same rates above will apply. However, if you are a landlord or buy-to-let buyer, you will have to pay the extra 3% surcharge in line with the rest of the UK.

Companies who purchase residential properties will have to pay the higher residential rates,  trusts buying up residential properties may also be taxed more.

The WRA tax calculator is again on hand to clear up any confusion if it exists.

Who are the winners and losers of the new tax?

According to new research, the average buyer in Wales will be £560 better off as a result of the changes. However, buyers purchasing a house worth over £402,000 will be negatively affected (and worse off) thanks to the newly introduced legislation.

Buyers in Powys will witness the biggest savings (£1,095), the research found, closely followed by Ceredigion and the Isle of Anglesey. The average buyer in these locations will save £1,088 and £1,064 respectively under LTT rules.

Savings are also significant in Wales’ biggest cities, including Cardiff (£799), Newport (£800) and Swansea (£351), as well as popular locations such as Pembrokeshire (£827), Flintshire (£853) and Wrexham (£567).

While areas where average prices are below the stamp duty threshold will witness no change (they were paying £0 before and will still be paying £0 now), second home owners will pay less with the higher rate if the property they are purchasing is below £402,000.

By contrast, higher value properties will be hit with higher taxes. A home worth £1 million, for example, will accumulate £61,200 in LTT compared to only £43,750 in stamp duty.

Will the rest of the UK follow Wales and Scotland?

It seems unlikely that the current stamp duty system in England and Northern Ireland, which was transformed as recently as December 2014, will be changing anytime soon – but the savings made by buyers in Wales and Scotland may start to ramp up the pressure on Theresa May and her government to change tack.

There has recently been an overhaul of stamp duty for first-time buyers – with the majority now paying nothing when buying their first home – but the calls have been loud for stamp duty changes or a stamp duty holiday for a number of other demographics, while the additional 3% stamp duty surcharge on second homes continues to be highly contentious more than two years after its implementation.

For now, though, the changes made in Wales are unlikely to be reflected in England or Northern Ireland.



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