Guidance

Higher rates of Land Transaction Tax: introduction

Find out if you must pay higher rates of Land Transaction Tax (LTT) when you buy residential property in Wales.

Part of:
Organisation:
Welsh Revenue Authority
First published:
19 June 2019
Last updated:

Contents

For residential property, there are 2 rates of LTT: main and higher. This guide outlines when and why the higher rates of tax apply. 

You can also use our higher rates checker to help you work out which rate of LTT applies to your residential purchase. 

The Welsh Government sets the tax rates. 

When you do not have to pay LTT

You will not have to pay LTT if you: 

  • buy a property for less than £225,000 and you do not own any other property 
  • buy a new lease for less than 7 years

When the higher rates apply

You’ll usually pay higher LTT rates when both of the following apply: 

  • you buy a residential property worth £40,000 or more
  • you already own one or more other properties

You must include any residential property: 

  • you hold on behalf of children aged under 18 (parents are treated as owners, even if the property is held through a trust and they’re not the trustees) 
  • you have an interest in as the beneficiary of a trust 

If you’re a company

Companies must pay higher rates for any residential property they buy if: 

  • the property is £40,000 or more 
  • the property they buy does not have a lease on it with more than 21 years left 

Transfers of equity may also be at higher rates. 

If you’re married or in a civil partnership

The rules apply to both of you as if you were buying the property together, even if you’re not.

If higher rates apply to either of you individually, higher rates apply to the transaction as a whole.

Buying with someone else

The rules apply to each person buying the property (and their spouse or civil partner).

If higher rates apply to any of you individually, higher rates apply to the transaction as a whole.

The higher rates may apply if you already own your own home and are buying a residential property with or supporting: 

  • a friend 
  • a family member
  • anyone else

Higher rates may apply even if you won’t be living at the property, if you're to become a legal owner on the title deeds.

Types of mortgages

Different types of mortgages may affect whether the higher rates apply.  

We cannot advise on the various types of mortgage products available on the market.

Example 1

Anwen is buying her first house in Cardiff. Her mother is giving financial support and taking out a standard mortgage with Anwen. She will be a joint borrower and buyer.

Anwen’s mother won’t live in the new house because she already owns the property she currently lives in.

Because Anwen’s mother owns one or more other properties, the transaction for Anwen buying her first house will likely be at higher rates.

Example 2

Carwyn and Julie are married and live together, but only Carwyn owns this property. Their daughter Sophie has found a property to buy but cannot get a mortgage on her own.  

Julie is helping Sophie financially to buy the property.

Because Julie is married to Carwyn, she’s considered to have an interest in their home. So, the transaction for the house she buys with Sophie will likely be at higher rates.

Example 3

Owain is helping his son Dafydd buy a home. Owain owns the current property they both live in, and Dafydd does not own any other properties. 

Dafydd finds a property to buy in Aberystwyth. They get a ‘joint borrower, sole proprietor mortgage’ on the property.

This allows Owain to help Dafydd fund the purchase, but Owain does not legally own the property.

So, the transaction is residential and will not be taxed at higher rates.

When the higher rates do not apply

You will not usually pay higher rates if: 

  • you use your new property as your main home and have sold the last main home you owned before you buy your new home (or on the same day)
  • any of the following apply to the property you’re buying:
    • it’s worth less than £40,000 
    • it's a mixture of residential and non-residential space (like a shop with a flat above it) 
    • it's ‘moveable’ like a caravan, houseboat or mobile home 
    • it's a freehold property with a lease on it that has more than 21 years left, held by someone unconnected to you 

When and how to get a refund

If you sell your previous main home within 3 years of buying your new main home, you can usually apply for a refund. 

This refund is the difference between the higher and main rates amounts. 

Use our tax calculator to help work this out. 

If you buy a new main home but have not yet sold your old main home, higher rates will still apply to the transaction. 

You cannot get a refund if: 

  • you or your spouse/civil partner still own any part of your previous main home 
  • higher rates still apply for any other reason 

A longer period for the sale of your previous main residence may apply in certain situations. For further information on this longer period, use our higher rates technical guidance.

Reliefs and exceptions

You may qualify for a relief that reduces the amount of LTT you pay or an exception, so you do not have to pay. 

If you: 

If you're buying 6 or more properties, you can usually choose to pay either: 

  • non-residential rates of LTT 
  • higher rates of LTT with multiple dwellings relief

How to amend an LTT return

If you believe you’ve submitted your LTT return with the incorrect rate of LTT or any other mistake, you can amend your LTT return using our form.

Help and support

Higher rates are a complex area of the tax. This guide does not cover all scenarios and should not be solely relied upon to work out if you must pay any tax. 

For a more detailed explanation, or if you’re uncertain how the tax applies: 

First published

19 June 2019

Last updated

Organisation

Welsh Revenue Authority

Part of