Land transaction tax (LTT) is a tax paid to the Welsh Revenue Authority by the buyer on purchases of freehold or leasehold buildings or land in Wales.
As a solicitor, you must file a return and pay the tax on your client’s behalf within 30 days of completion for any purchase or lease of property or land over a certain value.
LTT replaced stamp duty land tax (SDLT) in Wales from April 2018. SDLT still applies in England and Northern Ireland.
Some of the differences between LTT and SDLT are:
- the threshold for LTT is higher than that for SDLT
- the relief for first-time buyers is not available in Wales
- the filing and payment deadlines are 14 days for SDLT and 30 days for LTT
The Welsh Government has provided guidance on the differences between LTT and SDLT.
How much is paid
You can work out the amount of tax that your client must pay using the Welsh Government’s land transaction tax calculator.
What is included
The buyer pays LTT on the ‘chargeable consideration’. Usually this is the price they pay for the property or land, including any fixtures and fittings.
If the sale price includes extra items such as furniture or carpets, or plant and machinery that can be easily removed, the buyer and seller must agree a fair price. This can be deducted from the sale price to get the chargeable consideration.
Thresholds and rates
The threshold for residential property is £180,000. If the price of the property is equal to or less than the threshold then the buyer does not pay any LTT.
If the price is above the threshold, the buyer must pay:
- 3.5% on the portion over £180,000 up to and including £250,000
- 5% on the next £150,000 7.5% on the next £350,000 10% on the next £750,000
- 12% on the remaining amount over £1,500,000
The threshold for non-residential property, such as commercial property, is £150,000. If the price of the property is equal to or less than the threshold then the buyer does not pay any LTT.
If the price is above the threshold, the buyer must pay:
- 1% on the portion over £150,000 up to and including £250,000
- 5% on the next £750,000
- 6% on the remaining amount over £1 million
Reliefs are available for certain types of transaction. These are explained in the Welsh Government’s guidance on reliefs.
Higher rate for additional dwellings
A higher rate is charged for an ‘additional dwelling’, if it is worth £40,000 or more. This applies to purchases such as buy-to-let properties or holiday homes, if the purchase means the buyer will own more than one property. The buyer must pay 3% on top of the normal rate.
Filing LTT returns
You must file a return even if the buyer does not need to pay any tax, unless the transaction is exempt.
A transaction is exempt from LTT and you do not have to file a return if:
- no payment changes hands
- the property is left in a will
- the property is transferred because of a divorce
- the property is freehold and worth less than £40,000
- the property is leasehold and worth less than £40,000 and the annual rent is less than £1,000 and the lease is seven years or more
- the property is leasehold and worth less than the LTT zero rate threshold and the lease is less than seven years
You must file the return and pay the tax within 30 days of the ‘effective date’ of the transaction. This is usually the completion date, but it can be the date when the transfer is ‘substantially performed’ if this happens before completion – for example if the buyer is given possession of the property early.
If you’re a solicitor you will need to register to use the Welsh Revenue Authority’s online services. You can then submit LTT returns online. As soon as your return is submitted, a unique transaction reference number (UTRN) will be produced in your online account.
If you’re not a solicitor or conveyancer, you cannot file a return online and you’ll need to send a paper return to the Welsh Revenue Authority (WRA).
Paying the tax
The deadline for paying the tax is the same as the deadline for filing the return: 30 days from the effective date of the transaction. You’ll need to file the return first, to get the UTRN.
The tax should be paid to the Welsh Revenue Authority and not to HMRC. When paying, it is important to use the correct UTRN and the correct WRA bank account. This will allow the WRA to link the payment to the LTT return.
There are several ways to pay. Some methods take longer than others and you’ll need to allow enough time for the payment to go through before the deadline. Payment methods include:
- Faster Payments
- by cheque through the post
Payment must be made to:
- sort code: 60 70 80
- account number: 10028838
- account name: Welsh Revenue Authority Tax
Penalties and interest
There are penalties for late filing and late payment.
If a tax return is late you will have to pay a penalty of £100. If the return is more than six months late you will have to pay a penalty of the greater of:
- 5% of the amount owed
There is a further penalty if the return is over 12 months late.
Solicitors should not become involved in or advise clients to use schemes that are structured to avoid or reduce LTT. The SRA has warned that it will look at the conduct of any firm that is actively involved in such schemes. They are also likely to be challenged by HMRC or the WRA.
A General Anti-Avoidance Rule (GAAR) applies to Welsh devolved taxes including LTT, under the Tax Collection and Management (Wales) Act 2016. It allows the WRA to tackle artificial arrangements that create a tax advantage, and is intended to deter taxpayers from using such arrangements.
The UK General Anti-Abuse Rule does not apply to Welsh devolved taxes. The Welsh GAAR and the UK General Anti-Abuse Rule are different, as explained in WRA guidance.
Read our practice note on disclosure of tax avoidance schemes
Disclosure of tax avoidance schemes