The temporary reduction period of the Land Transaction Tax has been extended to the 30 June 2021, in an announcement by Rebecca Evans MS, Minister for Finance and Trefnydd yesterday.
The extension will apply to transactions that complete from 1 April 2021 to 30 June 2021. From 1 July 2021 the Land Transaction Tax (LTT) residential property transaction rates and thresholds will revert to those that applied prior to 27 July 2020.
The LTT temporary tax reduction period was first introduced in July 2020 and applied to residential transactions that completed on or after 27 July 2020 and until 31 March 2021.
In her Written Statement, the Minister said:
‘I set out my decision in July 2020 that the starting threshold for land transaction tax main residential rates would be set at £250,000 from 27 July. The new threshold is £70,000 higher than the starting threshold for residential property transactions which existed prior to 27 July. It has resulted in only around 25% of those liable to the main LTT rates paying any tax at all. People buying their home in Wales costing more than £250,000 have made a saving of £2,450 over that which would previously have been payable, and people buying their homes in Wales costing less than £250,000 have not paid anything.’
Impact on practitioners
In the period August to January, this targeted tax reduction has supported 10,000 taxpayers in Wales who were liable to the main rates of land transaction tax. These were, broadly, people buying their homes, and who may have needed additional support due to the pandemic. It has increased residential property transactions in 2020-21, from that which would otherwise have occurred, and had a positive effect on the housing market.
Wyn Williams, Head of Residential Property at Harding Evans Solicitors, said the extension continues to be good news for buyers however noted that it may not be plain sailing for those involved in the already heavily pressured conveyancing sector and warned that practitioners need to look out for one another as the market continues to expand.
“This is good news for buyers and potentially leads another influx of new instructions. The conveyancing sector may have a different view as the increase in work has led to backlogs in pipelines and the majority of those working in the industry – agents, lenders, mortgage advisers; are under increasing amounts of pressure to continue to move things forward.
“A tapered approach may have saved us from going from a cliff edge to a cliff edge!”
Meanwhile, the recruitment drive for conveyancers, paralegals and legal assistants pushes on with a further influx of new jobs for the legal sector in Wales. Yolk Recruitment has posted a flurry of new roles this week – some with training and development funding to help careers flourish – that are intended to help residential property teams through the rush and beyond.
The Welsh Government is keen for the temporary tax reductions to ‘remain targeted’, and they will not apply to those buying property that is liable to the higher residential rates of LTT. The rates and thresholds for buyers of residential property acquired as an investment or as a second home remain unchanged.
The UK government’s decision to provide an extension to its temporary increase to the stamp duty land tax (SDLT) starting threshold may, as in July, also have an impact on the property market in Wales, especially in the Wales-England border areas. It is important to ensure that distortions to the property market are not exacerbated by decisions in Westminster. It is disappointing that – yet again – the UK government did not work with us in advance to collaborate and join up our tax policy decisions to ensure that we could examine the data and evidence to support our choices.
The main residential rates applying until 30 June 2021 and those that will apply from 1 July 2021 can be viewed at gov.wales/land-transaction-tax-rates-and-bands.