Key Updates to Welsh Land Transaction Tax: What Buyers Need to Know

On 10 December, the Welsh Government announced that the higher rate of Land Transaction Tax (LTT) rates will increase by 1% across all bands, for all property purchases that had not been exchanged as at 11 December 2024.

So, what does this mean for homebuyers?

Emma Gilroy, Director and Head of Residential Property at JCP Solicitors, explains.

The Welsh Government announced updates to Land Transaction Tax (LTT) as part of its Draft Budget. These changes, which focus on the higher residential rates, will come into effect immediately [from 11th December 2024] with a vote in the Senedd in January to determine whether they are made permanent.

What’s Changing?

1. Higher Residential Rates:

• The higher residential rates of LTT are increasing by 1 percentage point across all bands, setting them at approximately 5% above the main residential rates.
• Buyers of additional properties, such as second homes and buy-to-let investments, will bear these increases unless they meet the transitional rules.

2. Multiple Dwellings Relief (MDR):

• Draft regulations are being prepared to amend MDR rules. Buyers using the Subsidiary Dwelling Exemption (SDE) will no longer be eligible for MDR, ensuring they pay the main residential rates without this relief.

These changes relate to the higher rates of duty and do not affect the main residential rates which remain unchanged. Non residential and mixed use properties are also unchanged by this latest announcement.

The starting threshold for main residential rates remains at £225,000, ensuring around 60% of transactions remain exempt from LTT.

What Does This Mean for You?

For buyers of additional properties:

• Higher Costs: The increase in rates adds to the financial considerations for property investors and second-home buyers.
• Review MDR Impact: Buyers of multiple properties will need to reassess strategies, particularly if they previously relied on MDR.

For primary homebuyers:

No Change: With main residential rates untouched, affordability remains consistent for most first-time buyers. For homebuyers who have already exchanged contracts, they will pay the previous rates. 

For company buyers:

• Non-residential and mixed-use transactions will not be affected, but if companies are buying residential properties they should be aware of how these changes will increase the amount of LTT they pay.

Learn more about how JCP Solicitors can help with your legal needs by calling 03333 208644 or emailing hello@jcpsolicitors.co.uk.