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What is land transaction tax in Wales (formerly known as stamp duty)?
Land transaction tax in Wales (previously known as stamp duty) is payable when you buy land or property over a certain price. You can use the above land transaction tax calculator to work your liability using the current tax band rates.
The process for paying your land transaction tax is easy for buyers because your solicitor will normally do this for you. After completion the solicitor files a Land Transaction Tax (LTT) Form with the Welsh Revenue Authority online (although some can still submit a paper submission). Even if there is no LTT liability, the solicitor is still required to file a tax return.
Any land transaction tax payable must be paid within 30 days after the completion date. Although there is this 30 day payment term, if you are getting a mortgage, it is part of the mortgage lender's regulations that the solicitor is in funds with the land transaction tax before completion can take place. This means that you should be prepared to make payment to your solicitor for any land transaction tax liability the day before your completion date is set.
How much land transaction tax is payable?
The amount of stamp duty/land transaction tax that you pay depends on whether the land/property is residential or non-residential or mixed use. The above calculator should only be used for Residential land or property.
You pay SDLT/LTT on the consideration paid for the land or property. In most circumstances this will be the amount of money a buyer pays to the seller for the property. Consideration isn't always an exchange of money, it could also be:
- giving of goods (giving a personal possession in exchange for the land/property);
- providing works or services (giving work or a service in exchange for the land or property);
- release from a debt; and/or
- transfer of a debt, including the balance of an outstanding mortgage;
In the circumstances above, the value of the consideration (for example the value of the goods given) is the value used to calculate the stamp duty/land transaction tax on. If you are looking to transfer a property between family then you need to read this article - Gifting Property - 4 ways to gift your property
Can you own a property 50/50 with your partner but own 99% /1% of the property?
No. Your beneficial interest must be the same as your declaration to HMRC/WRA for your income from property. Click here to view HMRC's guide on Ownership and income tax: legal background: ownership.
What is the new higher rate for additional properties?
From the 1st April 2016 there is an additional 3% tax payable on the consideration on land/property for buyers who on completion own another property. This doesn't apply if you are replacing your main residence. NB All of the following is applicable regarding Wales' new Land Transaction Tax, which replaces Stamp Duty Land Tax for properties bought in Wales from April 2018.
The rules state:
3.1 The higher rates will apply to the purchase of a major interest in a single dwelling by an individual, if at the end of the day of purchase Conditions A to D are met:
- Condition A - the chargeable consideration is £40,000 or more;
- Condition B - the dwelling is not subject to a lease which has more than 21 years;
- Condition C - the purchaser owns a major interest in another dwelling which has a market value of £40,000 or more and is not subject to a lease which has more than 21 years to run at the date of purchase of the new dwelling; and
- Condition D - the dwelling being purchased is not replacing the purchaser’s only or main residence.
3.2 If any of Conditions A to D are not met the higher rates will not apply to the purchase.
For example: John lives and owns Property A as his main residence. John buys Property B. If at the time of completion John didn't sell Property A, then he will have to pay the second home stamp duty charge. It doesn't matter if John moves to Property B and chooses this to be his main residence, he still has to pay the additional 3% charge, because he hasn't sold Property A at the time he bought Property B.
For example: John lives and owns Property A as his main residence. John buys property B. On the day of completion John sells Property A, and buys Property B, then there is no second home land transaction tax charge.
"If you aren't selling your main residence, and then buy another property, then you most likely have to pay the additional stamp duty"
If you are moving from your main residence, however you bought before you sold, then you have 36 months to sell your old main residence in order to claim a refund of the additional land transaction tax..
Our Wales Land Transaction Tax Calculator (Stamp Duty in Wales) provides results for both sole property owners and second home owners - You can read more about the additional stamp duty payment here.
The rules are different for married couples & civil partnerships
If you are married or in a civil partnership then you need to check your individual circumstances, even if one of you is not going to be an owner of the property. As a rule, if either of you own another property on completion, it does not matter whether you are legal owners jointly or solely, you may still have to pay the second home land transaction tax if you fall under the set criteria.
The exact wording is as follows:
3.44 Where an individual with a spouse or civil partner purchases an interest in a dwelling and their spouse or civil partner is not a joint purchaser, the spouse or civil partner will be treated as a joint purchaser in respect of the transaction. 3.45 This means that where a purchaser is married or in a civil partnership, if Conditions A to D are met by either spouse or civil partner, the transaction will be a higher rates transaction.
Example 1 - Married with 2 separate properties
Andrew and Jayne, a married couple, each own a residential property, with neither having any interest in the other’s property. They both live in the property owned by Jayne: the property owned by Andrew is rented out. Jayne is selling her property and they are jointly purchasing a new one, which will be their new main residence. Andrew will retain his rented out property.
The higher rates will not apply to the joint purchase by Andrew and Jayne of a new main residence. As they are married and have both lived in the property owned by Jayne as their main residence they will both be treated as replacing their main residence.
Example 2 - Un-married with 2 separate properties
Alyson & James, who are not married to one another, each own a residential property, with neither having any interest in the other’s property. They both live in the property owned by Alyson: the property owned by James is rented out. Alyson is selling her property and they are jointly purchasing a new one, which will be their new main residence. James will retain his rented out property.
The higher rates will apply to the joint purchase of a new main residence by James and Jayne. As they are not married (or in a civil partnership) James will not be treated as replacing his main residence as, even though he has been living in the property owned by Alyson, he has no interest in the property Alyson is selling.
Read the full details on the Welsh Revenue Authority's Website regarding technical guidance for higher rates for purchases of residential property.
Do you pay the 2nd home tax if you own a property overseas?
If you or any joint owner own a property inside or outside of the UK that isn't being replaced by the purchase of your new property, then you will pay the additional stamp duty tax at the prevailing rate.
Do companies pay the second home land transaction tax?
The rules state:
5.1 The higher rates will apply to the purchase of major interests in one or more dwellings by a company, if Conditions A and B are met in respect of at least one of the dwellings:
- Condition A - the dwelling is purchased for chargeable consideration of £40,000 or more;
- Condition B - the dwelling is not subject to lease which has more than 21 years to run on the date of purchase;
5.2 If none of the interests in dwellings meet both Conditions A and B then the higher rates will not apply to the purchase.
Joint Mortgage Sole Proprietor mortgage, is there 2nd home stamp duty to pay?
The rules state:
Mr and Mrs M are helping their son buy his first property by providing the deposit for a flat which will be his main residence. Mr and Mrs M currently own just one property, the family home. Due to the bank’s lending criteria they require Mrs and Mrs M to be a party to the mortgage and be on the deeds of the property. On the same day as the purchase a deed will be executed which will provide that Mr and Mrs M have no interest in the property and that their son has full beneficial interest in the property.
The higher rates will not apply because Condition C is not met
Taking the above into consideration, if your intentions were for the legal owner to own 100% of the beneficial interest and for the parents to just be on the mortgage, then you would not pay the second home stamp duty tax.
If your intentions are for the parents to have a beneficial interest in the property and that they already own a beneficial interest in another property that is worth more than £40,000, then the second home stamp duty will apply.
You should call the Welsh Revenue Authority for help with Land Transaction Tax queries and to confirm your own personal liability on 03000 254 000 Opening times: 9.30am to 4.30pm, Monday to Friday (closed weekends).
CONVEYANCING COSTS
The solicitors' fees for buying a home vary dramatically depending on whether you approach an online conveyancing solicitor, a high street conveyancer or a solicitor introduced by your estate agent.
The actual conveyancing costs, outside of the legal work, should be fixed as they are set including:
For buyers
Land Transaction Tax (Wales), land registration, property searches, ID searches and leasehold charges (if buying a leasehold property).
For sellers
Office copies, title plan and management information (if selling a leasehold property).
It is important to make sure when budgeting the costs of moving home that you factor in all of the above conveyancing costs and ensure you get a fixed fee conveyancing quote from your chosen solicitor or conveyancer. Read our detailed guide!
WHICH PROPERTY SEARCHES DO I NEED?
It is so important when moving home to make sure you know as much about the property and its surrounding areas, especially about any potential risks to your property and its value.
By ordering searches you can find out so much about any threats to your investment such as preservation orders, planning permissions, flood risks, pollution and gas seepage.
Therefore we recommend that you get at least four searches: local authority, environmental, drainage and chancel repair. These can even flag up additional searches such as HS2, mining and flood reports which your solicitor can advise you on.
You can find out what searches you need when moving home by reading our guide on Property Searches
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