The 3% surcharge on buy-to-let homes will continue to be levied in Wales – despite hopes it would be ditched when the new Land Transaction Tax comes into force.
Stamp duty land tax will be devolved in April 2018 and RLA has been campaigning for Westminster’s 3% stamp duty levy on the purchase of buy-to-let property to be axed.
Since it became evident the Treasury was planning to keep the surcharge the association has been advocating for exemptions in certain circumstances; these include calls for the 3% surcharge to be waived when the property is on the market for a year or more or where the home is bought off plan.
It argued the charge would choke off the supply of much needed new housing – reducing choice for tenants and increasing rents at a time when landlords are set to be hit by changes to Mortgage Interest Relief and enforcement of the controversial Rent Smart Wales scheme.
The announcement is also bad news for tenants, with a recent RLA survey showing that 84% of PRS landlords are likely to consider increasing rents to cover their increased tax burden.
Welsh Finance Secretary Mark Drakeford confirmed the higher rate will continue to be levied, claiming that those responding to a consultation on the issue wanted rules to be consistent across the UK.
He said: “We have had an excellent response to the technical consultation about the higher rate of tax on purchases of additional residential properties and whether this should continue to apply in Wales when stamp duty is devolved in April 2018.
“There was a clear view from respondents about the importance of maintaining a single, consistent rate across the UK.
“I am today announcing that this levy will exist in Wales when land transaction tax – the successor to stamp duty in Wales – comes into force. The vital revenue generated will continue to help fund our valued public services.
“It is important we use the opportunity of tax devolution to consider whether changes can be made to improve efficiency, effectiveness and create a focus on Welsh needs and priorities.”
Douglas Haig, RLA director for Wales said: “It is disappointing that the Welsh Government didn’t take the opportunity to remove this restrictive taxation as the PRS is vital to solving the housing crisis here in Wales.
“However we are pleased to see the Minister is looking at exploring exemptions and look forward to working with him and his department to this end.”
To read the full announcement from the Welsh Government click here.