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Rebecca Evans MS, Minister for Finance and Trefnydd

First published:
21 December 2020
Last updated:

Included in the draft Budget I have published today, are details of our plans for how Welsh devolved and partially devolved taxes are supporting our spending priorities and delivering a fairer and more progressive tax system in Wales.

This statement sets out these plans, including some changes which are being introduced from 22 December.

Welsh Rates of Income Tax

The Welsh Government has made a commitment not to raise Welsh Rates of Income Tax during this Senedd, therefore, as outlined in the draft budget announcement, the three rates, basic, higher and additional, will remain at 10 pence for 2021-22. This will mean that Welsh taxpayers will continue to pay the same rates as their English and Northern Irish counterparts.

As part of our commitment to raise awareness of our Welsh taxes, and linking this tax with public spending, our website now provides the ability for a Welsh Income Tax taxpayer to calculate their Welsh Rates of Income Tax liability and see how that money is spent delivering public services in Wales.

Attached is a link to the Welsh Rates of Income Tax calculator:

https://gov.wales/calculate-welsh-income-tax-spend

Land Transaction Tax

With effect from 22 December 2020, I am, subject to subsequent Senedd approval, raising each of the higher residential rates tax bands of Land Transaction Tax by 1 percentage point. The higher rates are generally paid on purchases of homes which are not bought, generally, to be the main residence of the buyer but, for example, to provide a second home, be used as part of a holiday letting business, or for a longer term letting.

Buyers of residential properties liable to pay the higher residential rates will now pay an additional 4% (up from 3%) of the cost of the property over and above the main residential rates.

I am also lifting the starting threshold on the Land Transaction Tax paid on non-residential property purchases by 50%. Businesses will now, in the main, pay no tax on purchases costing up to £225,000.  This will provide a small but material amount of additional support to businesses.

The changes will result in fewer businesses having to pay tax on the acquisition of commercial property or when entering a new lease.  Businesses buying properties that are required to still pay tax, will see a reduction in the tax cost, providing more significant savings to those lower-priced property purchases. The changes mean that Wales will have the highest thresholds at which tax starts to be payable on non-residential property transactions in the UK.  As we emerge from the pandemic, these changes underline the Welsh Government’s support for businesses which operate in our foundational economy.  It will also provide some support for those businesses wishing to start, or expand, and may also help those that need to dispose of commercial property as a result of the impacts of the pandemic. 

I am also making changes to the amount of ‘relevant rent’ that applies to non-residential lease acquisition transactions to reflect the increases to the thresholds.  The relevant rent amount will increase from £9,000 to £13,500. This particular change will come in to effect, again subject to Senedd approval, in early February 2021.

The net impact of these changes is estimated to provide an additional £4 million this year and then approximately £13 million annually. As I have set out in the Draft Budget 2021/22 narrative document, the additional revenue raised by the new higher residential rates will support the Welsh Government’s housing priorities, helping more people secure quality, warm housing. The changes also re-balance the Land Transaction Tax burden, reducing costs for businesses to support economic recovery from the COVID-19 pandemic, and increasing the tax costs for those liable to the higher residential rates.

Annex 1 sets out these changes to the rates and bands coming into force on 22 December in more detail. The Regulations and accompanying Explanatory Memorandum setting out the details of these changes will be published later today.

I am also confirming today, the Welsh Government will not be extending the current Land Transaction Tax temporary tax reduction introduced in July for tax paid on, broadly, residential properties to be used as a main residence beyond the planned end date of 31st March 2021. 

This will mean that transactions completing on or after 1 April 2021 will no longer benefit from that increased threshold. We were clear this was a temporary measure to support the housing market in an unprecedented time.  A return to the rates and bands which existed prior to 27 July will mean, again, Wales will be the only country in the UK with a starting threshold which is higher than the average price of a home. This means the majority of homebuyers will still not be liable for Land Transaction Tax and maintains this Government’s progressive approach to taxation.

The main residential rates applying until 31 March 2021 and those that will apply from 1 April 2021 can be seen at https://gov.wales/land-transaction-tax-rates-and-bands.

Landfill Disposal Tax

From 1 April 2021, I will be raising the Landfill Disposal Tax rates in line with inflation. This is consistent with the UK landfill tax rates for 2021-22, to support the policy objective of reducing waste disposed of at landfill, and to help meet our goal of becoming a zero waste nation.

It has been important to maintain stability over these rates given the economic uncertainty generated by the pandemic and the UK’s departure from the European Union.

By setting rates that are consistent with UK landfill tax, public services in Wales will continue to benefit from tax revenue, while ensuring the risk of the movement of waste across borders is reduced.

The changes to the rates from 1 April 2021 are set out in Annex 2.

This statement is being issued during recess in order to keep members informed. Should members wish me to make a further statement or to answer questions on this when the Senedd returns I would be happy to do so.

Annex 1

Land Transaction Tax

Changes in force from 22 December 2020

Table 1: Residential Property Transactions - Rates and Bands from 22 December 2020

Higher rates Residential property transactions

 

Tax band

 

 

 

Relevant consideration

 

 

Percentage tax rate

 

First tax band

 

Not more than £180,000

 

    4%

 

Second tax band

More than £180,000 but not more than £250,000

 

    7.5%

 

Third tax band

More than £250,000 but not more than £400,000

    9%

 

Fourth tax band

More than £400,000 but not more than £750,000

    11.5%

 

Fifth tax band

More than £750,000 but not more than 1,500,000

    14%

 

 

 

Sixth tax band

More than £1,500,000

     16%

 

 

 

 

 

Annex 1 (cont.)

Table 2: Non-Residential Property Transactions - Rates and Bands from 22 December 2020

Non-Residential property transactions

 

Tax band

 

 

 

Relevant consideration

 

 

Percentage tax rate

 

Zero rate band

 

Not more than £225,000

 

    0%

 

First tax band

More than £225,000 but not more than £250,000

 

    1%

 

Second tax band

More than £250,000 but not more than £1,000,000

    5%

 

Third tax band

More than £1,000,000

   6%

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3: Chargeable consideration which consists of rent - Rates and Bands from 22 December 2020

Non-Residential property transactions

 

Tax band

 

 

 

Relevant consideration

 

 

Percentage tax rate

 

NRL Zero rate band

 

Not more than £225,000

 

    0%

First tax band

More than £225,000 but not more than £2,000,000

 

    1%

Second tax band

More than £2,000,000

    2%

 

 

 

Annex 2:

Table 4: Landfill Disposal Tax rates from 1 April 2021

Rate 

2021-22

Standard rate

£96.70 per tonne

Lower rate

£3.10 per tonne

Unauthorised disposals rate

£145.05 per tonne