Finance and Taxation Reform Opinion Wales

Storm clouds gathering as Land Transaction Tax rates revealed

Daniel Bellis
Written by Daniel Bellis

Back in 2016 I wrote a piece called “Could 2018 see the decline of the PRS in Wales”, where we set out all the positives that the PRS has (and continued to) deliver, against all the regulatory changes and costs coming our way.  

The conclusion was that April 2018 would signal the start of a decline for the PRS if something wasn’t done to incentivise growth in the sector – such as Stamp Duty reform.  

Since that article was written, we’ve seen the full implementation and enforcement of Rent Smart Wales, the Renting Homes Act, and plans announced to ban agency fees in Wales.  

So it was with great interest that last week Finance Sectary for Wales Mark Drakeford announced his budget, and in it were the details for the first Welsh Tax in over 800 years; Land Transaction Tax. 

Land Transaction Tax replaces what many people will know as Stamp Duty in Wales, and will come into effect from the start of the new financial year, April.  

England (current rates)  Wales (new rates from April) 
Up to £125K 0% no tax  Up to £150K 0% no tax 
Between £125k and £250k 2%  Between £150K and £250K 2.5% 
Between £250K and £925K 5%   Between £250k and £400k 5% 
Between £925K and £1.5m 10%  Between £400k and £750k 7.5% 
Above £1.5m 12%  Between £750k to £1.5m 10% 
  Above £1.5m 12% 

 

Landlords or anyone buying a second property will have to pay an additional 3% on top of any tax above.

However, landlords will see little change or encouragement to invest further in the sector, as the additional 3% still remains, with no exemptions at present.  

Although the new Land Transaction Tax rates are good news for first time buyers (who typically purchase towards the lower end of the scale), it is less good news for PRS landlords or those looking for a family home (three or four bedroom).  

With prices in Wales’ capital for a family home pushing £400k in some areas, buyers can expect to pay an additional 2.5% compared to their compatriots in England.  

That additional 3% paid by landlords is potentially devastating for those looking to invest in the family rental market, as the percentage paid on a home over £400K will be 10.5% after the additional levy is included.  

This means fewer landlords investing in properties to provide homes for families, and more difficult for families without a spare £40K cash (based on a 10% deposit) who will have fewer choices when it comes to finding that family home.  

This leave us in a precarious position. With no encouragement for investment (for example a tax cut when bringing empty homes onto the market), the raft of regulatory and MIR changes, 2018 could be the first year we see a decline in the PRS for Wales.  

Although a lot can happen in a year, the storm clouds are still gathering for April 2018.  

About the author

Daniel Bellis

Daniel Bellis

Daniel is the Policy Officer for the RLA in Wales, working hard to make sure that our members voices are heard by the people elected to office.

Prior to joining the RLA, Daniel worked in MP’s offices and with communications firms, working on election strategies and the communication campaigns of major companies. Daniel also holds a MScEcon in European Governance and Public Policy from the University of Cardiff where he extensively studied lobbying regulations in the UK, US and EU.

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