LTT needs to be paid when you purchase or lease a building or land in Wales for prices over a certain value. The tax applies to land transactions whose 'effective date' (normally the date of completion) falls on or after 1st April 2018. When purchasing or receiving a residential property, you must usually submit an LTT return to the Welsh Revenue Authority (WRA) even if you do not need to pay any LTT. There are exceptions to this requirement (see below).
This information only applies in Wales.
Purchases of land and property in the UK over a certain value are generally subject to Stamp Duty Land Tax (SDLT) in England and Northern Ireland or Land and Buildings Transaction Tax (LBTT) in Scotland. Introduced on 1st April 2018, the Welsh equivalent is the Land Transaction Tax (LTT).
What is the Land Transaction Tax (LTT)?
What's the difference between LTT and SDLT?
The LTT broadly mirrors the SDLT, which it has replaced. However, there are a few differences:
- there are different rates of tax
- LTT contains certain additional rules relating to higher LTT rates for residential property transactions
- LTT has a potentially stricter anti-avoidance regime - its 'General Anti-Avoidance Rule' (GAAR) applies to 'artificial' tax avoidance, whereas the SDLT equivalent applies only to 'abusive' arrangements (a higher threshold). LTT also introduces a broad 'Targeted Anti-Avoidance Rule' (TAAR) which is applicable to all reliefs which may be part of a ‘tax avoidance arrangement’ (arrangements for purchasing properties that were entered into largely for the purpose of avoiding taxation).
- under LTT the rent element of newly granted residential leases will usually be exempt from tax (it is chargeable under SDLT)
What is the Welsh Revenue Authority?
The Welsh Revenue Authority (WRA) is responsible for collecting and managing the LTT, as well as other Welsh devolved taxes. Although operationally independent, it is accountable to Welsh Ministers and to the National Assembly for Wales.
What are the main residential LTT rates?
As of 6 April 2022, the LTT threshold is £180,000 for residential properties. Property which is purchased for less than this price (or which is worth less than this amount if it is being transferred in exchange for payment, for example, because you are taking on a mortgage) is not liable for LTT. The current rates are as follows:
for any portion of the price/value up to £180,000 = 0%
for any portion of the price/value between £180,001and £250,000 = 3.5%
for any portion of the price/value between £250,001 and £400,000 = 5%
for any portion of the price/value between £400,001 and £750,000 = 7.5%
for any portion of the price/value between £750,001and £1.5 million = 10%
for any portion of the price/value above £1.5 million = 12%
Example: Frank buys a house for £450,000. He pays no LTT on the first £180,000. He pays 3.5% of the next £70,000 = £2,450. He pays 5% on the next £150,000 = £7,500. He pays 7.5% on the remaining £50,000 = £3,750. So in total Frank must pay £2,450 + £7,500 + £3,750 = £13,700.00.
What are the higher residential rates?
A higher rate of LTT is normally payable in respect of purchases of additional residential properties (ie property that you purchase while you already own another property) This is usually 3% on top of the main residential rates. The current rates (as of 6 April 2022) are as follows:
- for any portion of the price/value up to £180,000 = 4%
- for any portion of the price/value between £180,001 and £250,000 = 7.5%
- for any portion of the price/value between £250,001 and £400,000 = 9%
- for any portion of the price/value between£400,001 and £750,000 = 11.5%
- for any portion of the price/value between £750,001 and £1.5 million = 14%
- for any portion of the price/value above £1.5 million = 16%
In some circumstances, you may not have to pay the higher rate. For instance, if your new property is worth less than £40,000, or if it is of mixed-use (ie both commercial and residential).
If you are replacing your main residence with the residential property that you are purchasing, but you still own your previous main residence, you will have to pay the higher rate. However, you can apply for a refund if you sell your former main residence within 3 years of the purchase.
For more information about the higher residential rates, see the Welsh Government’s guidance.
Reliefs and exemptions for LTT on residential property
In certain situations, you may not have to submit an LTT return or pay LTT. Such circumstances include:
- you receive property under a will and you do not give anything in exchange for it
- a property is transferred to you as the result of a divorce or dissolution of a civil partnership
- you purchase a freehold property for less than £40,000
- you purchase a new or assigned lease for a price under certain thresholds, which depend on the length of the lease
For more information on these exemptions, read the Welsh Government’s guidance on LTT.
What are the non-residential rates?
As of 6 April 2022, the LTT threshold is £225,000 for non-residential land and properties. Property which is purchased for less than this price (or which is worth less than this amount if it is being transferred in exchange for payment, for example, because you are taking on a mortgage) is not liable for LTT. The non-residential rates for a freehold property are as follows:
- for any portion of the price/value up to £225,000 = 0%
- for any portion of the price/value between £225,000 and £250,000 = 1%
- for any portion of the price/value between £250,001 and £1 million = 5%
- for any portion of the price/value above £1 million = 6%
These rates usually also apply to leasehold non-residential property, but the calculations can be more complex. You can use the WRA LTT Calculator to work out how much LTT must be paid for a particular transaction.
What are the non-residential property rent rates?
If you pay rent of more than £13,500 per year on a lease that you own, the usual 0% tax band (set out above) may not apply to the purchase price that you originally paid for the lease (called the ‘lease premium’). In this situation, you would pay the 1% LTT rate on all of the purchase price up to £250,000.
You may also have to pay LTT on the rent you pay on a lease during its term, if the lease was newly granted (ie created) when you purchased it. The rates for this particular type of LTT depend on the lease’s ‘net present value’ (NPV) (ie the total rent due over the life of the lease).
As of 6 April 2022, the LTT rates for rent paid on a non-residential lease are:
any proportion of the rent up to £150,000 per year = 0%
any portion of the rent between £150,001 and £2 million per year = 1%
any portion of the rent above £2 million per year = 2%
For more information on LTT for non-residential leasehold properties, including worked examples, see the Welsh Government’s guidance.