People buying their main homes in Wales costing less than £250,000 will not pay any tax under temporary measures announced by the Finance Minister today.
The starting threshold for land transaction tax will increase from £180,000 to £250,000 for the residential main rates when this new measure is introduced on Monday 27 July. This is a tax reduction that will last until 31st March 2021.
The new threshold will further reduce the tax burden in Wales. Around 80% of homebuyers liable to the main rates of land transaction tax will not pay any tax. This will be a tax reduction of £2,450 per transaction.
These changes reflect the nature of the housing market in Wales, where house prices on average are considerably lower in Wales [£162k] than in England [£248k]. For first time buyers the average price paid is £139,000 in Wales, and £208,000 in England.
This tax reduction will not apply to purchases on additional properties including buy to let and second homes.
The Finance Minister will also confirm that the savings made by adopting these temporary rates in Wales will release £30m in new funding to support the construction of new, energy efficient social housing in Wales.
Last month, the Welsh Government announced only a partial reopening of the housing market in Wales meaning:
- All house moves could only go ahead where the residential property had been unoccupied i.e. vacant for at least 72 hours.
- House moves could take place where a sale had been agreed but not yet completed.
- The marketing and viewing of unoccupied residential property can take place.
- Valuations and inspections of occupied residential property were allowed but should be done so safely and in line with the Welsh Government’s guidance on working in someone’s home.
Currently in Wales no tax is paid on the first £180k of a property, however it increases to 3.5% up to £250k, 5% up to £400k, and 7.5% up to £750k. From the 8th July, residential property purchasers in England and Northern Ireland, buying property under £500k, will pay no stamp duty, up until the end of March 2021.
Finance Minister Rebecca Evans said:
“This tax holiday will help first time buyers as well as those selling to move on, but we are taking a different direction to support jobs and house building in Wales.
“While eliminating taxes for those that need extra help, the tax holiday rate also reduces the tax paid on more expensive properties to help the wider housing market
“Under these changes more than three quarters of homebuyers will pay no tax at all, an increase of 20% under our current measures.
“By setting these rates for Wales I am also able to confirm £30m to support the construction of new social housing and the much needed jobs they can deliver.”
Julie-Ann Haines Chief Customer Officer at Principality Building Society, said: “We welcome today’s announcement to raise the property sale tax threshold to £250,000 but would have liked to see greater action being taken to restore confidence in the housing market. It would be good to see Welsh government to be more creative with their recently gained new tax powers, by, for example, reducing land transaction tax for older consumers who may want to downsize but find it expensive to do so, or find there are few alternatives available to them. We need to get all parts of the housing market moving and the challenge for Wales is to ensure that we increase the supply of suitable and affordable accommodation options.”