LAND TRANSACTION TAX: Tax Charges, Rates, and Bands

land transaction tax/land and building transaction tax
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Whether you’re purchasing a property outright or with a mortgage, land transaction tax (LTT) is something you must pay if you are buying land or property in Wales. However, you will only need to pay land transaction tax if you are purchasing properties over a certain price. Furthermore, when you are paying LTT, the land transaction tax calculator will help you work out how much land transaction tax you are going to pay. We have designed this guide to assist you with everything you need to know about LTT in Wales asWales as land and building transaction tax. Have a nice time reading.

Land Transaction Tax Wales

Land Transaction Tax (LTT) is a kind of property tax in Wales that was created to replace the former stamp duty land tax. It became functional on April 1, 2018, and, as a result, became the first Welsh tax in almost 800 years.

LTT is a tax on chargeable interest obtained in residential and commercial land as well as building acquisitions (including commercial purchases and commercial leaseholds). In addition, you must inform the Welsh Revenue Authority (WRA) which collects and manages the tax for the Welsh Government of a land purchase under the Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Act 2017. Regardless, the only exception is if it fits into one of the Act’s exempt categories.

Land tax in Wales (as in the rest of the UK) is computed on a percentage basis, with somewhat varied thresholds. A 3% surcharge will be applied to buyers in Wales who purchase a second residential property for more than £40,000.

If you spend more than £180,000 on a home in Wales, you’ll have to pay Land Transaction Tax (LTT). If you’re purchasing a second home, you’ll have to pay the residential rates for each band.

However, according to Section 6, Land Transaction Tax and Anti-Avoidance of Devolved Taxes of the (Wales) Act 2017, An Acquisition includes the creation, surrender, release, or variation of land interest. Thus, LTT is chargeable irrespective of:

  • Where the transaction is effected
  • The residence of the person making the acquisition.
  • Whether a transfer document is executed

The person who acquires the interest is responsible for paying it on the due date, which is 30 days after the transaction’s effective date. However, the effective date is the earliest of the transaction’s completion and the contract’s significant performance.

Land Transaction Tax Rates and Bands

The Cabinet Secretary for Finance and Local Government released the LTT rates and bands as part of the Welsh Government’s budget. The starting threshold was originally set at £150,000, but after the UK government introduced stamp duty land tax relief for first-time purchasers in the 2017 Autumn Budget, the Welsh Government raised it to £180,000.

However, the LTT adds additional bands for properties worth more than £250,000, which will now be subject to a greater rate of stamp duty land tax than they would have been before.

Who Pays Land Transaction Tax?

LTT is paid by the following persons:

  • a person who purchases shares in a firm and receives the right to occupy the property as a result of those shares
  • the beneficiary of a trust that buys stock in a corporation and receives the right to occupy the property as a result of those shares
  • a person who stands as a beneficiary of a trust in place of another person, where the trust owns shares in a firm and those shares grant the right to occupy the property.
  • a secured party who, under the terms of a security arrangement, has created a secured interest in the shares.

The phrase ‘right of occupation’ refers to the terms of the company’s articles of organization. However, it has nothing to do with housing requirements or residency. Yet, if the articles grant a ‘right of occupation,’ land transaction tax is required, whether or not the property is actually occupied.

Land Transaction Tax Charges

#1. Charges for transferring ownership

The market value of the shares bought is used to compute LTT. The tax rate differs depending on the transaction’s worth, and maybe you’re a first-time buyer.

#2. Charges for a security interest

If you obtain a security interest agreement (for illustration, a secured loan) in relation to the company’s shares, you will pay this fee.

NOTE: Residential properties with a “lower value” have a cheaper rate.

Land Transaction Payment

Two copies of the completed forms, along with payment for the tax owed payable to the ‘Treasurer of the States,’ should be mailed or delivered in person to the Customer and Local Services cashiers.

One copy will be kept by the cashier, while the other will be returned to you stamped with an official receipt to give to the company secretary. However, this, along with any other papers required, must be provided in order for the shares to be transferred into your ownership.

The deadline

The LTT must be paid within 28 days of the transaction date. However, if the duty is not paid within this time frame, a 10% surcharge will be applied. Furthermore, you can pay LTT ahead of time for a transaction.

Transactions that are not in sterling

If you make the payment in a currency apart from sterling, the transaction’s value will be the closest approximation in sterling.  Nonetheless, you’ll need a certificate with the signature of a banker in Jersey that shows the current exchange rate on the day of the transaction.

Who Has to Pay LTT

If you acquire a house or land in Wales for more than a particular amount, you must pay LTT. The threshold is the point at which the tax becomes effective.

The current LTT limit is:

Residential properties are worth £180,000. (if you do not own other property)

£225,000 for non-residential property and land

The above limit is established on the Welsh Government’s LTT rates and bands.

However, if you own one or more residential properties, the laws are different, and you may need to pay higher residential rates. The higher charges may not apply if you’re replacing your primary residence.

Thus, you must pay the tax if you:

purchase a freehold home

purchase a new as well as an existing leasehold property

When you take out a mortgage or buy a portion of a house, you are transferring land or property in exchange for payment.

How much is the Transaction Tax?

There are various rate bands for Land Transaction Tax (LTT).

Nevertheless, calculating the tax is based on the part of the property purchase price descending among each band.

Check out this illustration, if you purchase a property for £500,000, the LTT you owe is calculated as follows:

0% on the first £180,000 = £0

3.5% on the next £170,000 = £5,950

5% on the next £150,000 = £7,500

Total LTT = £13,450

LTT Rates And Bands

The amount of LTT you pay depends on: 

  • when you bought the property 
  • whether it’s residential or not 
  • how much you pay for it 

NOTE: The day you finalize the purchase of the property is usually the effective date.

Main residential tax rates

When you purchase a residential property (either freehold or leasehold), the following rate of tax is determined by reference to percentages of the chargeable consideration for the transaction falling within the proposed bands.

                      Purchase price/price threshold  LTT rate
up to and including £180,000    0%
over £180,000 up to and including £250,000    3.5%
over £250,000 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%
The portion over £1,500,000    12%

Higher Residential Tax Rates

The following rates apply when you buy a residential property and already own one or more residential properties.

For purchasers who are replacing their main residence, the higher rates may not apply.

  • Companies buying residential properties will have to pay higher residential rates.
  •  Trusts buying residential properties may as well have to pay the residential higher rates
                      Purchase price/price threshold  LTT rate
up to and including £180,000    3%
over £180,000 up to and including £250,000    6.5%
over £250,000 to and including £400,000    8%
over £400,000 up to and including £750,000    10.5%
over £750,000 up to and including £1,500,000    13%
The portion over £1,500,000    15%

Non-Residential Property Tax Rates

The below rates apply to purchases of non-residential property such as shops, offices, or agricultural land either on freeholds or leaseholds.

                      Purchase price/price threshold  LTT rate
up to and including £150,000      0%
over £150,000 up to and including £250,000      1%
over £250,000 to and including £1,000,000      5%
above £1,000,000      6%

Non-Residential Property Rent

For rent on the grant of a lease, the 0% tax band may not apply to the lease premium. This is called the “relevant rent rule.”  However, the relevant rent threshold changed in February 2021. Rent over the term of the newly granted lease is liable to LTT, which is calculated on the property’s net present value (NPV)

                      NPV threshold  LTT rate
up to and including £150,000      0%
over £150,000 up to and including £2,000,000      1%
above £2,000,000      2%

LTT Exemptions

Know that certain interests in land are regarded as exemptions. However, transactions involving exempt interests are not chargeable to LTT. 

Furthermore, the Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Act 2017 makes provision for exemptions from LTT.

The exemptions are as follows:

  • a ‘security interest’, that is, an interest or right (other than a rent charge) held for the purpose of securing the payment of money or the performance of any other obligation. The commonest example of a security interest is a mortgage
  • a license to use or occupy land (however, a document that describes itself as a license may in fact be a lease, especially if the practical consequence is that the grantee has exclusive occupation)
  • a tenancy at will (however, a tenancy described as a tenancy at will may in fact be some other tenancy, such as a periodic tenancy, especially if rent is paid)
  • a franchise granted by the Crown, for example, the right to hold a market or to take tolls
  • a manor (the ‘Lordship of the Manor’ or seignory, but note that a seignory may be accompanied by chargeable interests such as profits a prendre)

Land And Building Transaction Tax

LBTT is a tax on chargeable interest obtained in residential and commercial land as well as building transactions (including commercial assets and commercial leases).

Furthermore, the Land and Buildings Transaction Tax (LBTT) has been functional since 1 April 2015, replacing the UK Stamp Duty Land Tax (SDLT) in Scotland.

The land and building transaction charge is structured in such a way that it is more proportionate to the property’s real cost. In LBTT,  however, the percentage rate for each band is only applicable to the portion of the price that exceeds the relevant threshold and goes up to the next threshold. Likewise, there is no land and building transaction tax to pay if you purchase a home for less than the threshold.

Nevertheless, under land and building transaction, there are different rates and bands for different types of properties:

  • Residential properties
  • Residential property with Additional Dwelling Supplement (ADS)
  • Non-Residential properties
  • Commercial leaseholds

Land Transaction Tax Calculator

The Land Transaction Tax is something you will need to pay if you are purchasing a property or land in Wales. In addition, you only pay for one that costs over a certain amount of price. However, The Land Transaction Tax calculator will help you work out how much LTT rate you’ll probably need to pay.

This calculator calculates your land tax, including the absentee owner premium, at general rates (if applicable)

However, persons who can use this calculator include:

  • Individuals
  • Companies
  • Corporate groups
  • Joint ownerships
  • Trusts assessed at general rates
  • Unit as well as discretionary trusts for land used by a nominated PPR beneficiary.

In other to calculate your land transaction tax, the following are land transaction tax calculator options you can choose from

  1. Llywodraeth Cymru Welsh Government
  2. Money Helper
  3. Read Rains

Land Transaction Tax FAQs

Will there be a Land Transaction Tax holiday in Wales?

An exemption for homebuyers paying tax on properties that cost £250,000 or less is coming to an end.  Wales temporarily raised its threshold for land transaction tax (LTT) during the pandemic from £180,000 to £250,000, in line with other UK governments.

How do I pay my Welsh land tax?

To pay by cheque: make it payable to ‘Welsh Revenue Authority’ write the UTRN or payment reference number (if you’re filing by paper) on the back of it. Thus, it must be received 10 working days before the payment due date

Does stamp duty apply in Wales?

Do we pay stamp duty in Wales? Stamp duty is a tax paid by people buying properties, although, it varies slightly across the UK. In Wales, stamp duty is devolved. It is otherwise known as the land transaction tax (LTT).

Do I have to pay LBTT?

Land and Building Transaction Tax (LBTT) is a tax you might have to pay if you buy a residential property or piece of land in Scotland. However, If you’re buying your main property(land and or building), you will pay no LBTT on properties costing up to £145,000. This will apply if you’re a first-time buyer and if you’ve owned a property before

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Land and Building Transaction Tax (LBTT) is a tax you might have to pay if you buy a residential property or piece of land in Scotland. However, If you're buying your main property(land and or building), you will pay no LBTT on properties costing up to £145,000. This will apply if you're a first-time buyer and if you've owned a property before

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