A final decision on the rates for the LTT has not yet been taken, with various proposals on the table and a decision likely closer to the 2018 introduction date.

Like SDLT, LTT will be payable on purchases or leases of a building or land over a certain price. It may affect house buyers and sellers and businesses including builders, property developers and agents involved in the transaction process (such as solicitors and conveyancers).

The legislation will broadly be consistent with SDLT, preserving the underlying structure and mirroring key elements such as partnerships, trusts and reliefs, to provide stability and reassurance to businesses and the property market.

In the consultation document, the Welsh government states: ‘Marginal rates are thought to provide a fairer system of taxation than the slab structure with smaller distortionary impacts on the property market. The intention is for LTT to adopt a marginal tax rate structure.’

The intention is to broadly retain the current SDLT approach to partnerships, trusts, companies, and reliefs and exemptions.

There are indications that the Welsh parliament is reviewing whether to introduce the higher rate stamp duty charge, effectively a 3% surcharge for £500,000 plus properties, although currently sales of such properties represent only 1% of total transactions.

Just over half of property transactions in Wales are likely to pay the tax as the average residential property price in Wales (£145,000) is only slightly above the current SDLT threshold (£125,000).

In 2014/15, property transactions in Wales contributed £170m in SDLT to the Treasury.

Rates of LTT tax

Decisions on tax rates will be made closer to April 2018 to reflect economic conditions at that time. The research paper, Land Transaction Tax: Setting rates and bands, outlines some of the issues in setting the rates and bands for LTT.

Higher rates of Stamp Duty Land Tax on purchases of additional residential properties (including second homes) came into effect on 1 April 2016. The higher rates are under consideration in Wales as part of the LTT legislation being introduced in 2016.

The intention is for LTT to be progressive, similar to SDLT and land and buildings transaction tax (LBTT) in Scotland. This will mean that higher rates are paid by those buying more expensive properties.

Timetable

The bill was introduced into the National Assembly on 12 September 2016.

It is expected that the bill will receive Royal Assent by spring 2017.

Further reading

The Welsh government paper, Land Transaction Tax: Setting rates and bands, is available here