The LTT is payable upon the purchase or lease of a building or land in Wales over a certain value. It applies to land transactions whose 'effective date' (normally the date of completion) falls on or after 1st April 2018.
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). This has been replaced in Wales from 1st April 2018 with a 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 rates of residential property transactions
- LTT potentially has a stricter anti-avoidance regime - its 'General Anti-avoidance Rule' (GAAR) applies to 'artificial' tax avoidance whereas SDLT applies to 'abusive' arrangements. LTT also introduces a broad 'Targeted Anti-avoidance Rule' (TAAR) which is applicable to all reliefs
- under LTT the rent element of newly granted residential leases will 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 April 2018, the LTT threshold stands at £180,000 for residential properties; property which is purchased for less than this price (or is worth less than this amount if it is being transferred in exchange for payment) is not liable for LTT. The current rates (as of April 2018) are as follows:
- any portion of £180,001 to £250,000 = 3.5%
- any portion of £250,001 to £400,000 = 5%
- any portion of £400,001 to £750,000 = 7.5%
- any portion of £750,001 to £1.5 million = 10%
- any portion above £1.5 million = 12%
These rates apply both to sales and transfers of freehold property and also to the purchase price of the lease (called the lease premium) in respect of leasehold properties.
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; this is usually 3% on top of the main residential rates. The current rates (as of April 2018) are as follows:
any proportion of £180,000 = 3%
any proportion of £180,001 to £250,000 = 6.5%
any portion of £250,001 to £400,000 = 8%
any portion of £400,001 to £750,000 = 10.5%
any portion of £750,001 to £1.5 million = 13%
any portion above £1.5 million = 15%
What are the non-residential rates?
As of April 2018, the LTT threshold stands at £150,000 for non-residential properties; property which is purchased for less than this price (or is worth less than this amount if it is being transferred in exchange for payment) is not liable for LTT. The current non-residential rates (as of April 2018) are as follows:
- any portion of £150,001 to £250,000 = 1%
- any portion of £250,001 to £1 million = 5%
- any portion above £1 million = 6%
As with residential property, these rates also apply to sales and transfers of freehold property and to lease premiums of leasehold properties.
What are the non-residential property rent rates?
If you pay rent on the grant of a lease, the 0% tax band set out above may not apply to the purchase price of the lease (called a ‘lease premium’).
The rent over the term of a newly granted lease may be liable to LTT. The tax due is calculated on its ‘net present value’ (ie the total rent over the life of the lease).
The current non-residential rent rates (as of April 2018) are as follows:
any proportion up to £150,000 = 0%
any portion of £150,001 to £2 million = 1%
any portion above £2 million = 2%