In 2018 the Welsh Government obtained the devolved power to raise its own taxes. One of the most significant taxes that they have introduced in the last twelve months is the Welsh Land Transaction Tax (LTT).
As of April 2018, this tax replaced Stamp Duty Land Tax (SDLT) for all chargeable property transactions in Wales. Here, we recap one of the most significant tax changes in England and Wales over the last twelve months and compare SDLT with LTT.
Residential Property
Stamp Duty Land Tax
| From | To | Rate (Higher Rate*) |
| £0 | £125,000 | 0% (3%) |
| £125,001 (portion between) | £250,000 | 2% (5%) |
| £250,001 (portion between) | £925,000 | 5% (8%) |
| £925,001 (portion between) | £1,500,000 | 10% (13%) |
| £1,500,001 (portion above) | 12% (15%) |
*If more than one property is already owned, higher rates stamp duty will apply.
Welsh Land Transaction Tax
| From | To | Rate (Higher Rate*) |
| £0 | £180,000 | 0% (3%) |
| £180,001 (portion between) | £250,000 | 3.5% (6.5%) |
| £250,001 (portion between) | £400,000 | 5% (8%) |
| £400,001 (portion between) | £750,000 | 7.5% (10.5%) |
| £750,001 (portion between) | £1,500,000 | 10% (13%) |
| £1,500,001 (portion above) | 12% (15%) |
*If more than one property is already owned, higher rates stamp duty will apply.
Example
To give a worked example, if we take a residential house purchase for £275,000 at the normal rate, the calculations would look as follows:
| SDLT | LTT |
| Purchase Price: £275,000 | Purchase Price: £275,000 |
| 0% on the first £125,000 = £0 2% on the next £125,000 = £2,500 5% on the final £25,000 = £1,250 Total SDLT: £3,750 | 0% on the first £180,000 = £0 3.5% on the next £70,000 = £2,450 5% on the final £25,000 = £1,250 Total LTT: £3,700 |
Non-Residential Property
Stamp Duty Land Tax
| From | To | Rate |
| £0 | £150,000 | 0% |
| £150,001 (portion between) | £250,000 | 2% |
| £250,001 (portion above) | 5% |
Welsh Land Transaction Tax
| From | To | Rate |
| £0 | £150,000 | 0% |
| £150,001 (portion between) | £250,000 | 1% |
| £250,001 (portion between) | £1,000,000 | 5% |
| £1,000,001 (portion above) | 6% |
Example
To give a worked example, if we take a non-residential house purchase for £275,000, the calculations would look as follows:
| SDLT | LTT |
| Purchase Price: £275,000 | Purchase Price: £275,000 |
| 0% on the first £150,000 = £0 2% on the next £100,000 = £2,000 5% on the final £25,000 = £1,250 Total SDLT: £3,250 | 0% on the first £150,000 = £0 1% on the next £100,000 = £1,000 5% on the final £25,000 = £1,250 Total LTT: £2,250 |
The non-residential comparison is of particular interest as there is a significant difference between the rates payable (LTT is £1000 less) when the property is of a lower value. However, it is worth noting that LTT actually becomes more expensive than SDLT for higher value properties because of the final 6% tax band. For example if we purchased a non-residential property for £1,500,000 the two rates would look as follows:
| SDLT | LTT |
| Purchase Price: £1,500,000 | Purchase Price: £1,500,000 |
| 0% on the first £150,000 = £0 2% on the next £100,000 = £2,000 5% on the final £1,250,00= £62,500 Total SDLT: £64,500 | 0% on the first £150,000 = £0 1% on the next £100,000 = £1,000 5% on the next £750,000 = £37,500 6% on the final £500,000 = £30,000 Total LTT: £68,500 |
As such, lower value premises in Wales will attract a lower payable tax than those of a similar value in in England. Of course, this is good for smaller businesses in Wales, who will benefit from the lower rate and makes Wales more attractive for commercial purchasers.
If you have purchased property in the last twelve months and believe that your SDLT or LTT has been calculated incorrectly, we strongly suggest that you contact your accountant since we cannot give tax advice.
This is an informative article, which intends to highlight the differences between the rates payable and should not be relied upon for any commercial decision.
Categorised in: Commercial Property, News, Residential Property
Tags: Commercial Property, Residential Property