Finance minister, Rebecca Evans recently announced a Land Transaction Tax (LTT) ‘holiday’ in Wales, following the UK government’s changes to Stamp Duty Land Tax in England.
Until 31st March 2020 most residential properties sold for between £180,000 and £250,000 will be exempt from LTT. Until the new measure came into effect on 27th July, properties sold for £180,000-£250,000 paid 3.5% of the value in tax. Properties sold for £180,000 or less were already exempt from LTT.
The news will be welcome to many people considering a house move in Wales at the present time.
How will the Land Transaction Tax holiday affect residential property buyers in Wales?
Rebecca Evans has said that the change to Land Transaction Tax means no tax will be payable on about 80% of property transactions in Wales. The average residential property price in Wales is currently £187,322 which is just above the pre-holiday LTT threshold.
It is expected that the move will help first-time buyers to get a foot on the property ladder and some may decide to buy more expensive properties than they might otherwise have done.
The introduction of the LTT holiday could also help to keep buyers in Wales as without it many might have been tempted to purchase a property over the border in England to take advantage of the Stamp Duty Land Tax holiday.
How much will buyers save?
Before the LTT holiday was introduced a residential property selling for £248,354, the average price in Cardiff, would have paid 3.5% of the value in tax and so the buyer would have paid £2,392.39. A property sold for £250,000 would have cost £2,450 in tax.
Those purchasing properties worth more than £250,000 will also benefit from the holiday as they will not pay tax on the portion of their property under £250,000.
Are there any restrictions to the Land Transaction Tax holiday?
Unlike the Stamp Duty Land Tax holiday in England the LTT holiday does not include buy-to-let properties or second homes. These will still be liable to 3.5% LTT as well as the additional 3% surcharge.
The LTT holiday does not apply to commercial property.
Why has the Land Transaction Tax holiday been introduced?
Rebecca Evans hopes the Land Transaction Tax holiday will offer targeted help to people who are most affected by current economic changes – first-time buyers and those seeking to move up the property ladder rather than second home buyers. The move is also an attempt to jump-start the property market in Wales which didn’t re-open until 27th July. It is believed that a boost to the residential property market will benefit the wider economy by providing work for professionals such as conveyancers, surveyors, builders and developers as well as local services and home improvement retailers.
Although the threshold for the LTT holiday is significantly lower than the £500,000 Stamp Duty Land Tax threshold in England this is due to lower average property values in Wales and the financial implications for Welsh tax payers.
What is the outlook for the residential property market in Wales?
Before the lockdown residential house prices in Wales had the strongest annual growth in the UK. In the first quarter of 2020 house prices rose by 6.3% according to Nationwide. The relative affordability of residential properties in Wales combined with healthy pre-lockdown levels gives reason to be optimistic, particularly in the short to medium term.
Wales Online has reported a ‘flurry of activity’ since the housing market reopened. James Barnett from FBM Estate Agents in Pembrokeshire believes this is due to more people seeking a change of lifestyle as they work from home. People are looking to ‘escape to the country’ where property prices are relatively reasonable and there is more space for a home office. Areas such as Aberdyfi, Brecon, Crickhowell and Narbeth are already benefitting.
Research carried out by Zoopla shows that 34% of buyers and renters anticipate that they will be working from home in future, and 85% expect they will spend fewer hours working than pre-lockdown. Zoopla research also reveals that at least one in five buyers aged 35-49 consider a home office as a ‘must have’.
I am considering a house move – what is the first step?
As soon as you start searching for a house it is sensible to choose a residential property solicitor.
Starting the conveyancing process straightaway speeds up a house move from the outset. Paperwork to verify your address and proof of identity can be completed immediately. The sooner your conveyancer has the paperwork in their hands the faster they can begin local authority searches. Many local authorities have backlogs due to the coronavirus so it is sensible to start quickly.
The speed and efficiency of the conveyancing process has always been the key to a successful house move. If conveyancing does not run smoothly and takes a long time it is more likely that somebody’s circumstances will change at some time during the moving process, especially if you are in a property chain. There has always been the risk that somebody in the chain will fall ill, suffer a change in their financial or personal circumstances or find that their mortgage offer has expired and this is particularly true in the current climate.
Having a conveyancer on board throughout the house move process means that you have access to professional advice from the beginning.
How Insight Law can help you
Throughout the coronavirus pandemic our residential property solicitors have continued to adapt to the changing situation, prioritizing the safety of our staff and clients whilst at the same time maintaining high operating standards.
We know that moving house can be an anxious time, particularly at the moment. That’s why we work hard to keep our clients informed at every stage of the process. We are always ready and happy to answer any questions.
To talk about a house move or to find out more about what the Land Transaction Tax holiday might mean for you, get in touch with our team today: 02920 093600
Posted by Insight Law on
30 July 2020