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Written Statement - Land transaction tax rates and bands

Mark Drakeford, Cabinet Secretary for Finance

The indicative rates and bands for land transaction tax and landfill disposals tax were published alongside the draft outline Budget proposals on October 3 to aid scrutiny of the Welsh Government’s tax and spending decisions.

However, in announcing these rates and bands, I was clear that I would consider any changes made in the UK government’s Autumn Budget and any implications for Wales.

As a result, I have decided that the starting threshold for land transaction tax residential rates will be set at £180,000 from 1 April 2018 – and that this help will be made available to everyone in Wales who is seeking to buy a home in this part of the market. This new threshold is £55,000 higher than the starting threshold for stamp duty land tax and will reduce the tax burden for around 24,000 homebuyers – including first-time buyers – in Wales.

Following the UK government’s announcement of a stamp duty land tax relief for first-time buyers, I have given careful consideration to the right approach for the Welsh housing market and to help Welsh homebuyers. The changes introduced by the UK Government reflect the nature of the housing market in England, in particular, the challenges facing first-time buyers in London and the South East of England where house prices are considerably higher than they are in Wales.

In Wales, the average first-time buyer pays around £135,000 – the majority of first-time buyers would already have paid no land transaction tax under the rates I announced in October.

If Wales had adopted a similar approach to that taken by the UK government, first-time buyers in Wales would benefit from that tax reduction but this would do nothing to help equally hard-pressed families. My focus has been to help everyone looking to buy a home in this part of the market by increasing the progressivity of the tax overall.

The revenue raised by land transaction tax will directly help to fund public services and, in setting the tax rates, I have been guided by the principle that there should be no less funding for Welsh public services through tax rates at the point of devolution. The rates increase progressivity while maintaining revenues to support public services.

As a result of the changes to stamp duty land tax, the block grant adjustment has been reduced and is therefore lower than estimated at the time of the draft Budget. This will result in a net increase to the Welsh Government budget from previous estimates if there were no changes to land transaction tax. I have made use of the additional resources to provide more help to all those buying homes towards the lower end of the market.

The new land transaction rates for residential properties mean:

  • no one will pay more tax compared to the rates I announced at the time of the draft Budget
  • the average homebuyer in Wales will pay more than £500 less tax than under stamp duty land tax
  • around 90% of homebuyers in Wales will either pay the same or less tax than under stamp duty land tax
  • around 80% of first-time buyers in Wales will pay no tax, the same proportion achieved for English first-time buyers by the Chancellor’s original commitment.

The rates and bands I have announced today will be reflected in the final Budget. Regulations will be laid before the National Assembly in January.

A table showing the main residential tax rates and bands is attached.

Annex 1: Land transaction tax (LTT) main residential rates

Price threshold

LTT rate

£0-£180k 0%
£180k-£250k 3.5%
£250k-£400k 5%
£400k-£750k 7.5%
£750k-£1.5m 10%
£1.5m-plus 12%