Stamp duty in Wales is a government tax imposed on the purchase of residential properties1. It exists to discourage people from buying and selling homes too often, preventing the housing market from being flooded with properties that are constantly changing hands. Stamp Duty was introduced in Wales in 1803, and it has been applied ever since.
The amount varies depending on what county you are buying and other factors such as whether it’s a new property or not. Any other purchasers are involved with the transaction. You will be charged stamp duty when you buy your home. However, some buyers may find that they can claim back up to £15,000 of this fee! It also varies depending on where you live in Wales, so it’s important to know your local rate.
Different Rates for Different Types of Property Transactions
- First, £150,000 of the value is exempt from LTT (£0) – This applies to most residential homes, including those worth up to £200,000 and second properties such as buy-to-let.
- The next band is between £150,001 and £250,000, where LTT is 0% on the first two hundred grand (i.e. no tax charged at all), but then it increases gradually by way of a sliding scale up to 12%.
- The next band is between £250,001 and up to £500,000 where LTT is 0% on the first two hundred grand, but then it increases gradually by way of a sliding scale up to 16%.
- The next band is from 250K upwards. It has no exemption at all, so again the tax rate starts with 0%, slides up through 12%, 14%, 16% etc., depending upon how many hundreds of thousands your total value exceeds.
- The next band is from 125,000 upwards and has no exemption. The tax rate starts with 0%, slides up through 12%, 14%, 16%, etc., depending upon how many hundreds of thousands your total value exceeds.
- The final band is for those properties over 250k in price. Here we have exemptions available to first-time buyers and other exemptions available to various people with specific circumstances.
For those who are eligible for the 0% or 12% rates, you must apply. You may not qualify if buying with someone else unless they too have a disability which is worth checking out before proceeding as well!
First-Time Buyers LTT Rates
A first-time buyer is someone who has never owned or shared ownership of any residential property anywhere in the world before buying their own home via a “first-time buyer” mortgage. You are also considered a first-time buyer if you’ve lived with your partner as joint tenants for less than 24 months after getting married/civil partnered or moving in together.
The stamp duty in Wales for first-time buyers is set at a rate of 0.25% and not the usual UK threshold of £125,000 on property worth up to £300,000. For properties costing more than this limit, there will be an additional amount paid.
Home Movers LTT Rates
£0 on a property worth less than £180,000 when you buy it or sell it; 0.25% of the purchase price from £180,001 to £250,000; and 12% of the sale price above that at a rate which increases by one percentage point for every different band. So, 27% between £251,001 and £500 000 and 33% over £500 000. The Welsh Government advises buyers not to pay more stamp duty tax in their area than they would have been liable for had they bought in England. Some areas charge higher rates, like Monmouthshire.
Buy-to-Let LTT Rates
From April 2018, the Welsh Government raised the Land Transaction Tax rates for buy-to-let properties in Wales. The new LTT rate is 0.55% for all non-residential property, whether it’s a commercial or residential investment, and regardless of when you bought your property. It replaces the old system where landlords paid different rates depending on when they purchased their property and its use.
Buyers of second homes are unaffected by these changes as long as they meet specific criteria: you must live at least three months each year in Wales; spend more than 183 days per year here; are not working abroad; cannot claim to have a habitual residence outside Wales and do not own a property in Wales.
It will equate to an increase of £129 for every £100,000 spent on a buy-to-let purchase. It would be equivalent to moving from paying 0% Land Transaction Tax2 under the old rules. Consequently, no Stamp Duty up to buying at today’s stamp duty rate and then increasing it by .55%.
LTT is collected by the Welsh Revenue Authority (WRA).
After submitting an LTT return, the taxpayer or their representative must pay any taxes owed. You must make payment within 30 days of the transaction’s effective date. The completion date is usually the effective date. If your solicitor can’t do this for you, you can file it yourself. You can pay using digital, overseas or cheque payments.
Who Is Exempt from Paying LTT?
Property purchasers under £250,000, properties transferred during a divorce or the termination of a civil union, people who inherited a property through a will and have not made any payments.
When Are You Entitled to an LTT Refund?
Since you already own a house, if you purchase a new home before selling the old one, you will almost always have to pay the higher LTT rates on the new one. You will get a refund of the higher rate of LTT if you sell your old home within three years. The difference between the higher rate you charged and the main rate that would have applied to your new home will be refunded.
When Do You Pay LTT?
LTT must be charged within 30 days of the purchase being completed. Suppose you use a solicitor or conveyancer to purchase a home in Wales. In that case, they can file the Land Transaction Tax Return and pay any LTT owed to the Welsh Revenue Authority on your behalf (WRA).
What Is the Difference Between SDLT and LTT?
Buyers in England and Northern Ireland who purchase a residential property or piece of land for more than £500,000 are subject to Stamp Duty Land Tax (SDLT). From April 2018, Land Transaction Tax (LTT) replaced UK Stamp Duty in Wales. It is the levy that all buyers must pay when buying a property in Wales that costs more than £180,000.
The UK legislation on stamp duty is not easy for those outside the property industry. Still, there are some simple ways you can avoid paying it all together either as a buyer or seller and minimise your liability too. Some recent changes that will affect many people living in Wales may be affecting you whether buying or selling a home in Wales from now onwards. It’s always recommended to check with a property expert who will allow you to estimate how much tax would be charged on your house purchase.