An Update In Relation To Land Transaction Tax In Wales And Stamp Duty Land Tax In England
Land Transaction Tax in Wales
From 1st April 2018, a new Land Transaction Tax (LTT) operated by the new Welsh Revenue Authority will come into force for property transactions in Wales rather than Stamp Duty Land Tax (SDLT). Therefore different amounts of tax will be payable on property transactions from April onwards depending on whether the property is located in England or Wales.
At this time, much of the information regarding the new Land Transaction Tax (LTT) is still awaited as regulations are due to be laid before the National Assembly this month.
It would appear that, as the price paid by the average first time buyer in Wales is much lower than in England, Wales has decided to increase the nil-rate band for everyone rather than giving specific relief to first-time buyers as is the case in England.
Residential Property
The rates for the new Land Transaction Tax for residential properties are as follows:
| Price | Land Transaction Tax Payable |
| £0 – £180k | 0% |
| £180k – £250k | 3.5% |
| £250k – £400k | 5% |
| £400k-£750k | 7.5% |
| £750k-£1.5m | 10% |
| £1.5m+ | 12% |
Example: If you buy a house for £200,000, the LTT you would owe based on the information that has been published to date would be calculated as follows:
- 0% on the first £180,000 = £0
- 3.5% on the next £20,000 = £700
- Total SDLT = £700
It is interesting to note that:
- Property buyers in Wales will pay less tax on cheaper properties and more tax on expensive properties than they currently would under the existing SDLT rules in England. The tipping point for residential properties is £402,000.
- The Welsh Government estimates that around 80% of first-time buyers in Wales will pay no LTT, while only 10% of homebuyers will pay more tax under LTT than they ordinarily would have done under the current SDLT rules in England.
- As with SDLT, when it comes to the purchase of additional residential properties, the LTT rates will be 3% higher for these transactions.
Non-Residential Property
The rates for the new Land Transaction Tax for non-residential properties are as follows;
| Price | Land Transaction Tax Payable |
| £0 – £150k | 0% |
| £150k – £250k | 1% |
| £250k – £1m | 5% |
| £1m+ | 6% |
Again, interestingly:
- Purchasers of non-residential property in Wales will also pay less tax on cheaper properties and more tax on expensive properties. The tipping point for non-residential properties is £1.1 million
- When it comes to non-residential leases in Wales, the higher 2% rate will apply to any net present value above £2 million whereas the limit under the current SDLT rules in England sets a limit of £5 million for such transactions.
Therefore, based on the information that has so far been released in relation to the new Land Transaction Tax, it would be beneficial to try and complete the transaction before 1st April 2018 for those who are purchasing:
– a residential property in Wales with a purchase price of more than £402,000
– a non-residential property in Wales which a purchase price of more than £1.1 million
– a non-residential property in Wales with a net present value of more than £2 million
Stamp Duty Land Tax in England
Although the tax situation is changing in Wales, the situation in England remains the same in that you usually pay Stamp Duty Land Tax (SDLT) on increasing portions of the property price. The rates payable differ depending on whether the property is residential or non-residential.
Residential Property
The rates of SDLT for residential property in England are currently:
| Price | Stamp Duty Land Tax Payable |
| £0 – £125k | 0% |
| £125k – £250k | 2% |
| £250k – £925k | 5% |
| £925k – £1.5m | 10% |
| £1.5m+ | 12% |
Example: If you buy a house for £200,000, the SDLT you owe is calculated as follows:
- 0% on the first £125,000 = £0
- 2% on the next £75,000 = £1,500
- Total SDLT = £1,500
Important points to note:
– Under the current SDLT rules in England, first time buyers can claim a discount so that no tax is payable up to £300,000 and 5% on the portion from £300,001 to £500,000. If the price is over £500,000, the normal residential rates apply.
-When you buy a new residential leasehold property you pay SDLT on the purchase price of the lease using these rates. If the total net present value is more than £125,000, you also pay SDLT on 1% on the portion over £125,000 unless you buy an existing lease.
– When it comes to purchasing an additional property, you will normally have to pay 3% on top of the normal SDLT rates if this means you will own more than one property at any one time.
Non-Residential Property
The rates of SDLT for non-residential property in England are currently:
| Price | Stamp Land Duty Tax Payable |
| £0-£150k | 0% |
| £150k – £250k | 2% |
| £250k + | 5% |
When you buy a new non-residential leasehold property you pay SDLT on the purchase price of the lease using the rates above and the net present value. These are calculated separately and then added together. If you buy an existing lease, you only pay SDLT on the lease price.
The net present value is based on the total rent over the life of the lease and the rates are outlined below:
| Price | Stamp Land Duty Tax Payable |
| £0 – £150k | 0% |
| £150k – £5m | 1% |
| £5m+ | 2% |
An online calculator is available using the following link to calculate the SDLT payable on a transaction:
No such online calculator is yet available for Land Transaction Tax Liability in Wales.
Please feel free to visit the following websites for further information:
– Land Transaction Tax in Wales
– Stamp Duty Land Tax in England