Land Transaction Tax cut for buyers in Wales

The level at which Land Transaction Tax in Wales kicks in has been increased to £225,000 to reflect strong house price growth in the last few years.

If you’re buying a home costing up to £225,000, you won’t have to pay any Land Transaction Tax. The change will save you up to £1,575.

But if you’re buying a home in Wales costing more than £345,000, you’ll see an increase of up to £550 in the tax.

This is because the rate charged on the portion of a property costing between £225,000 and £400,000 is being increased from 5% to 6%.

The changes come into force from 10 October 2022.

Rebecca Evans, Minister for Finance and Local Government, said: “This is a change tailored to the unique needs of the housing market in Wales and contributes to our wider vision of a fairer tax system. These changes will get support to people who need it and help with the impact of rising interest rates.”

Why is this happening?

The Welsh Government was considering making changes to the tax at its Budget in 2021 to reflect increases to property values.

House prices in Wales have soared by 27% in the past two years, according to our latest House Price Index. The region has benefitted from people reassessing their housing needs following the Covid-19 pandemic.

The Welsh Government decided to bring the changes forward after Chancellor Kwasi Kwarteng announced an increase in stamp duty in England and Northern Ireland in September.

What are the new Land Transaction Tax rates?

The tax is charged in slabs, which means buyers pay a different rate on different portions of their property’s value.

So if you buy a home costing £225,000, you will not pay any tax. If you buy one for £400,000 you’ll pay £10,500, and if you’re buying a £750,000 property you’ll pay £36,750.

Who does it affect?

The change is great news for first-time buyers and people trading up the lower rungs of the housing ladder.

The Welsh government estimates 61% of homebuyers will not pay any tax at all on their purchase after 10 October as a result of the changes.

Even those buying more expensive homes higher up the ladder will not be hit too hard, with people purchasing a home worth more than £345,000 paying a maximum of £550 more in Land Transaction Tax.

But one group that will lose out is investment landlords and people purchasing holiday homes, as the reductions do not apply to those buying an additional property in Wales.

What’s the background?

As with the change to the stamp duty in England and Northern Ireland, the move aims to support the housing market at a time when activity is starting to slow down.

That said, the savings will be relatively small, with some purchasing a home for up to £345,000 saving only £1,575.

With interest rates expected to increase rapidly as a result of steep falls in the value of the pound, and mortgage rates already rising, this saving may not be enough to tempt buyers to go ahead with a purchase.