Since April 2018 the tax payable on the dealings of property in Wales is Land Transaction Tax (LTT) as opposed to Stamp Duty Land Tax (SDLT) which is payable in the rest of the United Kingdom.
The current LTT threshold is £180,000 for residential properties and £150,000 for non-residential land and properties. There are different rules if you already own one or more residential properties and you may need to pay the higher residential rates. It is also worth noting that if you obtain a commercial property with a view to making it residential or vice versa the threshold used will be how the property is used at the effective date of transaction not any future plans for the property regardless of whether planning permission has already been obtained.
It is also worth noting that if a property straddles on the boundary for England and Wales this is treated as two separate transactions so that each part of the property on the different boundary pays the appropriate proportion of LTT and SDLT respectively.
Timescale for filing a return and paying the tax:
From the effective date of the transaction (usually the date of completion) you have 30 days to file your return and pay any tax due. If you fail to file a return or pay any tax due within 30 days you will automatically face penalties and potentially interest on top.
However, where a contract for a land transaction has been entered into and is substantially performed before the date of completion, a deemed land transaction arises. The effective date of the transaction is therefore the date of substantial performance and the 30 day deadline to submit a return and pay taxes starts earlier.
Exceptions to paying LTT:
There are some exceptions when you don’t have to pay LTT or file a return these are noted below:
- no money or other payment changes hands
- property is left to you in a will and you do not make any payment for the transfer of this property to you
- property is transferred because of divorce or dissolution of a civil partnership
- you buy a freehold property for less than £40,000
- you buy a new or assigned lease of 7 years or more, as long as the premium is less than £40,000 and the annual rent is less than £1,000
- you buy a new or assigned lease of less than 7 years, as long as the amount you pay is less than the residential or non-residential LTT zero rate threshold
Rates of LTT:
The LTT rates apply on a progressive (or slice) basis. Consequently, only the chargeable consideration falling within a particular band is subject to the applicable rate of LTT for that band.
|Not more than £180,000||0%|
|More than £180,000 but not more than £250,000||3.5%|
|More than £250,000 but not more than £400,000||5%|
|More than £400,000 but not more than £750,000||7.5%|
|More than £750,000 but not more than £1.5 million||10%|
|More than £1.5 million||12%|
Non-residential and mixed use properties:
|Not more than £150,000||0%|
|More than £150,000 but not more than £250,000||1%|
|More than £250,00 but not more than £1 million||5%|
|More than £1 million||6%|
There are also a number of reliefs available which reduce or eliminate the amount of LTT payable. We would always advise seeking professional help to ensure returns and tax calculations are correct and submitted on time. If you require any help please contact our commercial property team who will be able to assist you further.