Property tax changes – Welsh government’s draft annual budget announcement

Key changes
The Welsh government has published its draft budget for 2021-2022, setting out changes in the following areas:

•  Land Transaction Tax
•  Landfill Disposals Tax

Tables have been published showing the changes in detail. These can be found on the Welsh government website here. In summary:

Land Transaction Tax (LTT) – residential

The Welsh government will not extend the current LTT temporary tax reduction for tax paid on residential properties to be used as a main residence beyond 31 March 2021.

Furthermore, the higher residential rates tax bands of LTT are each being raised by one percentage point. Buyers of residential properties will therefore pay 4% of the cost of the property over and above the main residential rates. This will take effect immediately, from 22 December 2020.

Land Transaction Tax (LTT) – non-residential

The starting threshold on LTT paid on non-residential property purchases will increase by 50%. This means no tax will be paid on purchases costing up to £225,000 with immediate effect from 22 December 2020.

Changes are also being made to the ‘relevant rent’ that applies to non-residential lease acquisition transactions. The relevant rent amount will increase from £9,000 to £13,500. This change is planned to come in to effect in early February 2021.

Landfill Disposal Tax

From 1 April 2021 Landfill Disposal Tax rates will be raised in line with inflation. Exact figures are set out in Table 4 on the Welsh government website here.

What this means for you

Prospective buyers should be aware of timescales when seeking to make the best decision. The timescales are summarised as follows:

• 22 December 2020:
  The higher residential rates tax bands of Land Transaction Tax are being raised to 4%. The starting threshold on the Land Transaction Tax paid on non-residential property purchases is being raised by 50%.
• Early February 2021:
  The relevant rent amount in non-residential lease acquisitions will increase from £9,000 to £13,500.
• 31 March 2021:
  End of current Land Transaction Tax temporary tax reductions.
• 1 April 2021:
  Landfill Disposal Tax rates will be raised in line with inflation.

A note on Welsh rates of income tax

For Welsh rates of income tax, the three rates will remain at 10p for 2021-2022. This means that for the moment, Welsh taxpayers will continue to pay the same rates as their English and Northern Irish counterparts.