Advertisement

  1. ITV Report

Tax break for first time buyers to end in Wales

Next April first time buyers in Wales will lose the exemption from stamp duty they were given in the Budget if they're paying £300,000 or less for their new home. The Finance Minister, Mark Drakeford, has decided that when stamp duty is devolved -and renamed Land Transaction Tax- he will ditch the tax break announced by Chancellor Philip Hammond..

Instead, he'll raise the property price at which any buyer has to pay tax to £180,000. That's £30,000 more than the £150,000 he had previously announced -and £55,000 more than the £125,000 at which stamp duty will start in England.

Finance Minister Mark Drakeford has decided to take a different approach to what was announced in the Budget by Chancellor Philip Hammond. Credit: PA

The change means that the average purchase price in Wales of £152,661 will be tax-free. Professor Drakeford points out that only an exceptionally well-funded first time buyer will lose out, as the average first property purchase is for £131,735. He estimates that 80% of first time buyers will pay no tax at all.

Under the changes to the main rates of land transaction tax, which I am announcing today, around 65% of these house sales will not be liable for tax.

The changes will benefit more buyers than the Chancellor’s targeted relief for first-time buyers – more than half of buyers will benefit from a reduction in tax relative to stamp duty land tax.

This is consistent with my aim to make tax fairer and contribute to a more equal Wales. These improved rates will help meet Wales’ needs and priorities and will make a real difference to people’s lives.

– Finance Minister Mark Drakeford AM

Here is the complete table of tax rates for the new Land Transaction Tax in Wales:

  • Up to £180,000: 0%
  • £180,000 to £250,000: 3.5%
  • £250,000 to £400,000: 5%
  • £400,000 to £750,000: 7.5%
  • £750,000 to £1.5 million: 10%
  • More than £1.5 million: 12%

The new tax comes in on 1 April 2018. From that date, the rates faced by Welsh homebuyers will be significantly different to the Stamp Duty rates in England. Here are the English rates for comparison:

  • Up to £125,000: 0%
  • £125,000 to £250,000 2%
  • £250,000 to £925,000 5%
  • £925,000 to £1.5 million: 10%
  • More than £1.5 million:12%

What's not clear is how much paying less or no tax helps homebuyers, as sellers are encouraged to demand higher prices if they know the purchaser won't have to pay tax as well.