Property buyers in Wales will be hit by a higher rate stamp duty on house purchases valued at over £400,000 in the first change to property tax as a result of new devolved tax powers which come into effect from 1 April 2018
The Welsh land transaction tax (LTT) and landfill disposals tax (LDT) are introduced on 1 April 2018, replacing stamp duty land tax and landfill tax.
Under the new rates for land transaction tax, Wales will have a lower starting threshold than the rest of the UK at £150,000 for residential rates but Welsh property purchases above £400,000 to £750,000 will face a 7.5% property tax, 2.5% above the current UK banding, while the 10% rate will kick in at a lower threshold of £750,000.
Residential land transaction tax (LTT) rates
| Price threshold | Main residential rates |
| £0 - £150,000 | 0% |
| £150,000 - £250,000 | 2.5% |
| £250,000 - £400,000 | 5% |
| £400,000 - £750,000 | 7.50% |
| £750,000 - £1.5m | 10% |
| £1.5m-plus | 12% |
Source: Welsh government, Budget 2017
By increasing the threshold at which the tax is payable, the average first-time buyer will pay no tax at all, the Welsh government stressed, and the average home buyer will pay nearly £500 less tax than under stamp duty land tax.
The additional residential property levy will be 3% on top of the main residential rate in each band; this is the same as under the current stamp duty land tax (SDLT) regime.
Non-residential land transaction tax (LTT) rates
| Price threshold | Rates |
| £0 - £150,000 | 0% |
| £150,000 - £250,000 | 1% |
| £250,000 - £1m | 5% |
| £1m plus | 6% |
Wales will have the lowest starting rate of tax for the purchase of business premises in the UK. All businesses buying premises up to the value of £1.1m in Wales will either pay no tax or up to £1,000 less tax than under SDLT.
Non-residential land transaction tax lease rates
| Net present value threshold | Rate |
| £0 - £150,000 | 0% |
| £150,000 - £2m | 1% |
| £2m plus | 2% |
To reflect the property market in Wales, the top land transaction tax rate for non-residential lease rates will apply from a lower net present value threshold.
For freehold purchases and transactions with lease premiums, it is forecast that 60% of taxable transactions will pay no tax.
Wales also plans to introduce a new higher rate of landfill disposals tax to crack down on illegal waste dumping. The new unauthorised disposals rate will be set at 150% of the standard rate.
Welsh landfill disposals tax rates
| Standard rate | 2018-19 | 2019-20 |
| Lower rate | £88.95 | £91.70 |
| Unauthorised disposals | £133.45 | £137.55 |
For the first two years of Welsh landfill disposal tax, the standard and lower rates will remain consistent with those for English landfill tax. This will provide certainty and stability for businesses and reduce the risk of waste moving across the Wales-England border.
Finance secretary Mike Drakeford said: ‘From April, Wales will introduce the first Welsh taxes in almost 800 years, supporting first-time buyers and boosting business.
‘The devolution of tax powers provides us with the opportunity to reshape and make changes to improve existing taxes to better meet Wales’ needs and priorities. I have always been clear that we will use these powers to help improve fairness and support jobs and economic growth in Wales.
‘We are being bold but balanced and leading the way in creating a fair and progressive tax system.”
Under the Wales Act 2014, the Welsh government has powers to put forward proposals for the development of new taxes in areas of devolved responsibility.
The finance secretary also announced a shortlist of four new tax ideas, based on feedback from the public, which will be developed further this autumn. These include vacant land tax, disposable plastic tax, tourism tax and a levy to support social care.
Following discussion, the Welsh government plans to put forward one concrete proposal on a new tax raising power to the UK government in 2018 to test the Wales Act powers.
Report by Sara White