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.
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.
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.