Finance Minister sets out homebuyers’ tax holiday for Wales: Rebecca Evans

14 Jul 2020

Finance Minister sets out homebuyers’ tax holiday for Wales

Y Gweinidog Cyllid yn cyhoeddi gostyngiad dros dro yn y dreth ar brynu tŷ

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.

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.”

Notes to editors

Notes to editors

Wales’ current threshold of £180,000 means that not only are we the only country in the UK with a starting threshold that is higher than the average price of a home, but means that currently around 60% of homebuyers do not pay tax.  

The current land transaction tax rates for residential properties mean that in 2019-20:

  • The average homebuyer in Wales had a tax cut of around £800 compared to stamp duty land tax;
  • Around 90% of homebuyers in Wales either paid the same or less tax compared to stamp duty land tax;
  • The vast majority of first-time buyers in Wales paid no tax.

There will be no changes to the higher rates of land transaction tax paid, broadly, by buy to let investors and second home owners. 

A table showing the main and higher residential tax rates and bands that will be in force from 27 July to 31 March 2021 is attached.

Residential Property Transactions

Rates and Thresholds from 27 July 2020 to 31 March 2021

Main rates Residential property transactions

 

Tax band

 

 

 

 

Relevant consideration

 

 

 

 

Percentage tax rate

Higher rates residential property transactions

 

Tax band

 

 

 

 

Relevant consideration

 

 

 

 

Percentage tax rate

Zero rate band

Not more than £250,000

    0%

First tax band

Not more than £180,000

     3%

First tax band

More than £250,000 but not more than £400,000

    5%

Second tax band

More than £180,000 but not more than £250,000

     6.5%

Second tax band

More than £400,000 but not more than £750,000

    7.5%

Third tax band

More than £250,000 but not more than £400,000

     8%

Third tax band

More than £750,000 but not more than £1,500,000

    10%

Fourth tax band

More than £400,000 but not more than £750,000

    10.5%

Fourth tax band

More than £1,500,000

    12%

Fifth tax band

More than £750,000 but not more than £1,500,000

    13%