A guide for tax professionals to the Land Transaction Tax (LTT) rates and bands changes, what this means for filing a return, and where to go for more information and support.
Changes to the LTT rates and bands
Nil rate band for main residential rates
On 3 March 2021, the Welsh Government announced that the temporary increase to the nil rate band of LTT for residential property transactions will be extended to 30 June 2021.
This means the nil band for transactions:
- before 1 July 2021, will be up to and including £250,000
- on and after 1 July 2021, will be up to and including £180,000
There will not be any transitional rules. A transaction will need to complete before 1 July 2021 to use the temporary increase to the nil rate band.
Higher residential rates
On 22 December 2020, the higher residential rates of LTT increased by 1% across all bands.
In most cases, where contracts had already been exchanged, but transactions not completed, the previous higher rate applies.
On 22 December 2020:
- the zero-rate band of the tax charged for lease premiums and assignments, and freehold property transfers increased from £150,000 to £225,000
- the zero-rate band of the tax charged on the rent element of non-residential leases increased from £150,000 to £225,000
What the change means for higher residential rates transactions
The new rates and bands apply from 22 December 2020, so if the buyer completes on buying a property:
- before 22 December they pay the previous rates of tax
- on or after 22 December they pay the new rates of tax
There’s an exception if they’ve exchanged contracts before 22 December but not completed. Here they might be able to use the previous rates of tax if there are no substantial changes to the transaction between exchanging and completing.
We have transitional guidance on the higher rates rate change. This expands on the regulations and covers which rates will apply to a transaction.
To file a return on our online LTT system showing you’re using the transitional rules
- Disagree with the tax calculation generated.
- Enter the correct total tax due using the previous rates and bands.
You can use our tax calculator to help you calculate the tax due, but you should use the exchange date as the effective date so that the calculation is made using the correct rates and bands.
- Select ‘transitional rules apply’ as the reason for disagreeing with the tax calculation and explain how you came to this calculation.
If you’re filing a paper return
Under question 92, please select ‘transitional rules apply’ as the reason for providing a different tax calculation to our tax calculator.
Transitioning to the new non-residential rates
For any non-residential transaction on or after 22 December 2020 the buyer will pay the new rates.
Changes to relevant rent
In the draft budget, the Welsh Government announced their intention to increase the 'relevant rent' amount for the annual rent element of non-residential rents from £9,000 to £13,500 in February 2021. This change was passed by the Welsh Parliament on 2 February and is effective from 4 February.
We’ve updated our tax calculator, relevant rent guidance and online services to reflect the change in relevant rent.
Help and Support
If you need any guidance on how these changes apply to a transaction, contact us.
If the taxpayer is unable to file or pay the tax to us on time because of their circumstances, tell us as soon as possible, and before the return or payment of tax is due.