A guide for tax professionals to the Land Transaction Tax (LTT) rates change, what this means for filing a return, and where to go for more information and support.
Changes to the LTT rates and bands
Main residential rates
The Welsh Government have confirmed that the temporary increase to the nil rate band of LTT for residential property transactions will end on 31 March 2021.
This means on 1 April 2021, these rates will revert to the original rates and starting threshold of £180,000. The buyer must complete their purchase before this date to use the temporary reduction rates.
Higher residential rates
The higher residential rates of LTT will increase by 1% across all bands on 22 December 2020.
In most cases, where contracts have 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 will increase from £150,000 to £225,000
- the zero-rate band of the tax charged on the rent element of non-residential leases will increase 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.
The Welsh Government have announced they intend to increase the 'relevant rent' amount for the annual rent element of non-residential rents from £9,000 to £13,500 in February 2021.
We’ll update our tax calculator to reflect the change in relevant rent when this has been passed by the Welsh Parliament.
For leases with an effective date in or after February 2021, where the relevant rent is between £9,000 and £13,500, you’ll need to contact us to get an LTT calculation.
Help and Support
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.