Update on Land Transaction Tax: higher rate for purchases of additional residential properties

17th October 2016

The Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill set out proposals for a new Land Transaction Tax to replace Stamp Duty Land Tax (SDLT) from April 2018 in Wales. It does not, however, include provision for a higher rate of tax on purchases of additional residential properties, which currently exists under both Stamp Duty Land Tax in England and Wales and Land and Buildings Transaction Tax (LBTT) in Scotland. 

The higher rate for additional properties, which currently stands at 3%, is a new aspect of stamp duty land tax and only came into effect on 1 April this year. To help better understand people’s views about whether it should also be a feature of land transaction tax in Wales from April 2018, the Assembly published a Treasury Paper and undertook a technical survey on the operation and application of the higher rate provisions over the summer. The responses to the technical survey and Treasury Paper are now published. 

A total of 100 responses were received and were varied but some clear areas of consensus were identified, including the importance of adopting the same exemptions to the higher rate surcharge as provided under Stamp Duty Land Tax and the importance of a single consistent rate across the UK so distortions are not created, particularly across the Wales-England border.

The Treasury Paper and technical survey also provided an opportunity to seek stakeholder views about how the higher rate surcharge could be adapted to make it better suited to Wales. Suggestions included alignment to the Housing (Wales) Act 2014 and Wellbeing of Future Generations (Wales) Act 2015. There were also calls to consider the impact and use of long-term empty properties to be brought back into use as affordable housing. 

Cabinet Secretary for Finance and Local Government, Mark Drakeford, confirmed that he intends to make provision for a higher rate surcharge on purchases of additional residential properties in the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill during stage 2.

The bill was introduced into the National Assembly on 12 September 2016 and is expected the bill will receive Royal Assent by spring 2017.

The report Land Transaction Tax: Higher rates for purchases of additional residential properties – summary of engagement responses is available here: Land Transaction Tax: Higher Rates for Purchases of Additional Residential Properties 

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