Stamp Duty is to be replaced with a Land Transaction Tax in Wales as from April 2018, the Welsh Government has announced.
The new Land Transaction Tax will be Wales’ first new tax for nearly 800 years and will form part of an initiative to create devolved tax arrangements that are more suited to Wales and Welsh public services.
The Land Transaction Tax would be payable on the purchase or lease of building or land in Wales over a certain price, and a statement from the Welsh Government has confirmed that the new legislation will be ‘broadly consistent’ with the UK’s stamp duty framework.
The new bill will allow Welsh Ministers to set rates and bands for tax in secondary legislation, thus potentially having a noticeable impact on the Welsh Property market.
The statement from the Welsh Government also goes on to state that the stamp duty surcharge, as introduced on 1st April this year, which is applicable to second homes and buy to let properties, is ‘under consideration’.
The rates for the Land Transaction Tax will not be confirmed until nearer April 2018, before the new system is to be implemented, in order to reflect economic conditions at that time.
The aims and objectives behind the new bill, as set out in the impact assessments document, are linked to promoting efficiency and reflecting the ‘wider social and economic circumstances in Wales’ as well as to ‘generate sufficient revenues to support Welsh public services’.
Property sales in Wales generate between £100 million and £235 million in stamp duty revenue every year.
The finance secretary, Mark Drakeford, said: “This is an historic milestone in the devolution of tax powers to Wales. This bill marks another step towards the creation of taxes which are more suited to the needs of Wales and support Welsh public services.
“This is a tax which affects so many of us. By replacing stamp duty land tax with a new made-in-Wales land transaction tax, public services in Wales will continue to benefit from the revenues raised by this important tax.
“We have consulted widely about how this tax should work for Wales and listened to a range of views. This is why it will broadly mirror stamp duty land tax, providing the consistency and stability businesses tell us they need and providing a smooth transaction for home-buyers and the property market. We have also been able to learn from the devolution of the tax to Scotland.”
Wales, which has not had control of its tax system since the 13th century, is following Scotland’s lead, after it introduced a Land and Buildings Transaction Tax (LBTT) in April 2015.
In Scotland the LBTT threshold is set at £135,000, compared to the Stamp Duty Land Tax threshold of £125,000. LBTT is then just 2% on property priced between £135,000 and £250,000, with transactions over £1 million attracting tax of 12%.
The new Welsh bill was introduced to the National Assembly yesterday, Monday 12th September, and is expected to receive Royal Assent next year, ahead of its introduction in April 2018.