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On 1st April 2018, Stamp Duty was be replaced by Land Transaction Tax in Wales, saving the average home buyer £560. But what exactly are the differences between Stamp Duty and Land Transaction Tax? And who stands to win and lose from the changes? Luckily, house removals experts Compare My Move are here to explain all.
We’ll explain the difference between the two rates, and explore how the changes affect every area in Wales. We’ll even highlight how much the average house buyer will save in every area of Wales, with the help of our newly updated Cost of Moving House Calculator.
So, without further ado, what exactly is Land Transaction Tax?
Stamp Duty and Land Transaction Tax function the same, in that both have different rates for different proportions of a house’s price. The main difference is that the lower threshold for 0% has been raised to £180,000 for Land Transaction Tax, compared to £125,000 for Stamp Duty. As the current average house price in Wales is £153,034, this effectively means the average house buyer in Wales won’t pay any rate (a saving of £560).
As the graph below shows, Land Transaction Tax favours lower priced houses, before being near enough the same as Stamp Duty up until £402,000. This is the point that the rates intersect, and Land Transaction Tax becomes more expensive that Stamp Duty.
So simply, if your property is below £402,000, Land Transaction Tax will be cheaper than, or the same as Stamp Duty.
Check out the different rates below or use our updated for 2019/2020 Stamp Duty Calculator.
|Portion of House Price||Land Transaction Tax Rate|
|Up to £180,000||0%|
|£180,001 to £250,000||3.5%|
|£250,001 to £250,000||5%|
|£400,001 to £750,000||7.5%|
|£750,001 to £1.5 million||10%|
|Portion of House Price||Stamp Duty Rate|
|Up to £125,000||0%|
|£125,001 to £250,000||2%|
|£250,001 to £925,000||5%|
|£925,001 to £1.5 million||10%|
The average homebuyer in Wales will save £560 when the Land Transaction Tax replaces Stamp Duty, but there are some areas that benefit even more.
With the current average house price in Wales at £153,034, the average homebuyer would have paid £560 in Stamp Duty before the change. Under the new Land Transaction Tax rules, the average homebuyer would pay no rate on this purchase.
Areas with average house prices close to the new 0% threshold of £180,000 see the biggest savings. For example the average housebuyer in Powys paying £179,789 will pay no Land Transaction Tax, saving £1,095 against Stamp Duty.
Check out a breakdown of savings below.
Home buyers will be worse off by the new Land Transaction Tax if purchasing a property worth more than £402,000. At this point, Land Transaction Tax overtakes Stamp Duty, and from here the gap only widens. For example, a £1,000,000 property costing £61,200 in Land Transaction Tax, compared to £43,750 in Stamp Duty. So the biggest losers from the change are buyers purchasing multi-million pound houses.
It's worth noting that areas with low average house prices see no change. For example the average buyer in Merthyr Tydfil would be under the threshold for both rates.
Those looking to purchase a second home face the higher rate of Stamp Duty, and this is no different for Land Transaction Tax. But as both system's higher rates simply add 3% to every bracket, second home owners are actually better off buying in Wales for certain prices homes. Much like those buying one home, second home owners will pay less than the equivalent Stamp Duty if the property is less than £402,000. For properties more expensive than this, Land Transaction Tax is substantially more than Stamp Duty.
Here we break down the savings every area of Wales will see from the change from Stamp Duty to Land Transaction Tax.
|Area||House Price*||Stamp Duty**||Land Transaction Tax***||Amount Saved****|
Isle of Anglesey
Neath Port Talbot
Rhondda Cynon Taf
Vale of Glamorgan
Our research shows that the Land Transaction Tax will benefit the average house buyer across all of Wales. The average house buyer in 18 counties of Wales would pay Stamp Duty, but using the same average house prices, the average home buyer in only 3 Welsh counties would pay Land Transaction Tax.
Average home buyers in areas like Powys will save £1,095, which is a substantial amount when moving into a new house and every penny counts. We've updated our Cost of Moving House Calculator to include Land Transaction Tax, so movers in Wales stay fully informed of the costs involved with moving house.
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