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The recent announcement from Chancellor Rishi Sunak in respect of Stamp Duty Land Tax confirmed that, for properties in England and Northern Ireland from 8 July 2020, the threshold for paying Stamp Duty Land Tax was raised from £125,000 to £500,000 until 31 July 2021. This replaced the existing first time buyer discount.
These measures applied to England and Northern Ireland only, meant that those thinking of buying a home in Wales were left wondering what measures would be taken across the border. The risk for the Welsh government was that home buyers in Wales might decide to move across the border to take advantage of the tax cuts.
In response, Welsh Finance Minister, Rebecca Evans, has announced that Land Transaction Tax (the Welsh equivalent to Stamp Duty Land Tax) would be cut to zero for properties valued between £180,000 and £250,000 from 27 July 2020 until the end of March 2021.
Welsh properties selling for less than £180,000 are already exempt from Land Transaction Tax. Diverging from the policy introduced in England, second homes and buy-to-let properties are not covered by the change and will continue having to pay an extra 3% on top of the standard charge.
Prior to the holiday being introduced, Land Transaction Tax on Welsh properties was charged at 3.5% for those properties selling at up to £250,000 and 5% up to £400,000. Unlike England, the Welsh government had not introduced a waiver or discount for first time buyers.
The relatively high levels at which Land Transaction Tax is set in Wales, once house prices rise above £250,000, are explained at least in part by the fact the average house prices in the principality are generally much lower than those in England.
Different average house prices
In Wales for example, the highest average house price is £275,656 in Monmouthshire. For comparison, the average price in London according to the ONS is £486,000. The level at which the Land Transaction Tax exemption in Wales applies has been set so that approximately 80% of all house sales will be covered.
Speaking at the announcement of the policy, Rebecca Evans highlighted what she felt to be the targeted nature of the change: “Unlike in England, this new threshold will not apply to the purchase of additional properties such as buy-to-lets or second homes.
“It will support people looking to purchase their first home or those seeking to move up the property ladder. So it will offer more targeted help to those who may be affected by the economic challenges resulting from the pandemic.”
At the same time she admitted that the change was a direct response to the changes being made in England, and reflected the ‘porous’ nature of the border between England and Wales.
Whether you are looking to buy in Wales or England and would like to discuss your needs with an experienced conveyancing team, please get in touch with David Alexander on 01543 267195 or by email at firstname.lastname@example.org
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