What is Land Transaction Tax (LTT)?
11 August 2022
When purchasing your first home in Wales, you may be wondering whether you’re obligated to pay land transaction tax. This is a property levy paid to the Welsh Revenue Authority upon completion of the purchase of a property. There aren’t currently any exemptions to the tax in Wales for first-time buyers, however, in this article, we’ll discuss what other financial and legal help is available while purchasing your first home.
As a first-time buyer, there is plenty to be aware of during the property-purchase process. Conveyancing and land transaction tax may be two concepts that are completely new for many buyers. When investing in a home, you’ll want to ensure that you are fully informed and prepared to pay any associated costs. By learning more about property purchases, you can feel confident throughout the transaction.
What is Land Transaction Tax?
Land Transaction Tax (LTT) is a government tax charged on properties in Wales. The amount of tax you’ll pay depends on the purchase price of the property you’re buying.
The current LLT rates for typical buyers are calculated as follows:
Property Price Current standard rate
Up to and including £180,000 0%
Over £180,000 (Up to and including £250,000) 3.5%
Over £250,000 (Up to and including £400,000) 5%
Over £400,000 (Up to and including £750,000) 7.5%
Over £750,000 (Up to and including £1,500,000) 10%
Over £1,500,000 12%
Why was Land Transaction Tax introduced?
Before the change in 2018, properties in Wales were subject to Stamp Duty Land Tax, much like properties across the rest of the UK. This tax was introduced as a way to raise revenue for the government. It’s been in place since 1694 and has since undergone several alterations.
The current stamp duty system was introduced in 2003. The amount of tax paid by typical property owners is based on ‘bands’ such as those described above, rather than a flat rate. In 2018, the Land Transaction Tax replaced Stamp Duty in Wales. This was changed to create a more efficient and fair system that worked based on the country’s needs.
Instead of the rates being set by the UK government, the Welsh government now defines the bands on which LTT payments are based. The system changed to make it more progressive so that people buying more expensive homes contribute more tax.
Stamp Duty vs. Land Transaction Tax for first-time buyers
In the UK there is a stamp duty relief for first-time buyers on properties priced up to £300,000. Buyers in England and Northern Ireland are able to benefit from total exemption from stamp duty up to this property value.
For first-time buyers in Wales, this exemption does not apply. Due to the lower thresholds between bands, and far lower property prices in Wales, the Welsh Government have decided that first-time buyers are not in need of Land Transaction Tax relief.
What additional help is there for first-time buyers in Wales?
Whilst there isn’t specific relief for first-time buyers regarding Land Transaction Tax, the Welsh government does offer a range of support schemes for those purchasing their first home. They aim to help homebuyers facing a range of challenging financial circumstances.
– Shared Ownership Wales
The shared ownership scheme aims to help potential buyers who want to purchase their own property but can’t afford 100% of the cost. The Welsh government offers supplements to the buyers by allowing them to purchase between 25% and 75% of the property.
A repayment mortgage is taken out on the portion of the property that has been purchased. Rent is paid on the remaining amount with the option to incrementally increase the percentage of ownership over time.
– Help to Buy Wales
Both first-time buyers and existing homeowners can benefit from the Welsh help-to-buy scheme. By providing up to 20% shared equity loans, the government allows buyers to purchase properties that may have previously been out of their price range.
As little as a 5% deposit is needed to buy a home with the Help to Buy scheme, making it far more accessible. A mortgage is required to cover the remaining 75% of the property price.
The equity loan remains interest-free for five years after purchasing the property. It can be repaid at any time or on the sale of the home
– Homebuy Wales
The Homebuy scheme is provided for those who could not afford to purchase a property without significant financial assistance. It offers buyers an interest-free equity loan between
30% to 50% of the property price. The remaining 70% to 50% is then funded with a mortgage or existing finances.
This scheme is incredibly helpful for those who otherwise wouldn’t be able to afford a property that suits their needs. The interest-free loan can be repaid with the sale of the property or whenever the money is available.
The ‘share’ of the property owned by the housing association will need to be calculated through a property valuation. This will indicate whether the amount to be repaid has gone up or down in value.
Legal support and property guidance for first-time buyers
With so many different things to be aware of during the property purchase process, it can be overwhelming for first-time buyers to keep track of everything. On top of conveyancing disbursements, survey costs and estate agent fees, there is also a tax for purchasing a property.
Thankfully, Redkite Solicitors are here to help. Our conveyancing services make property purchases hassle-free, and our expert legal advice can guide first-time buyers through the process. We can help you manage and understand a range of topics, including land transaction tax. For helpful, expert solicitors, contact Redkite Solicitors today.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.