Significant Changes to the Tax Regime in Wales, 1 April 2018

From 1st April 2018, significant changes are made to certain taxes in Wales. Notably, the new Land Transaction Tax come into force. This affects all individuals and businesses within and outside Wales - involved in the sale or transfer of land and property in Wales.

This year 1st April has seen the introduction of the first mainstream Welsh taxes since the Thirteenth Century; tax is becoming a big differentiator between the English and Welsh business environments. 

As time goes by the amount of clear blue water broadens between what happens in England and in Wales. The Welsh Revenue Authority came into existence last year. As its name suggests, it’s there to oversee a process which is bespoke for Wales.

We’re already used to dealing with Welsh taxes. We’ve had our own business rates in Wales since 2015. At first they’ve generally run in-line with English non-domestic business rates - until fairly recently, when comprehensive reviews brought many rural businesses into new tax thresholds. We provided advice to many members about this process and how to appeal if this is appropriate. This devolved process is now well-established – and we’re now familiar with the perceived anomalies which may mean that two similar competing businesses, just a stone’s throw apart - on either side of the England-Wales border, can be experiencing different tax burdens.

From 1st April, Stamp Duty Land Tax (SDLT) became the Land Transaction Tax (LTT) with Welsh rates and bands. The new rates for the Land Transaction Tax are:

New  LTT Rates in Wales

Residential

Non-Residential

Up-to £150k

No tax

Up-to £150k

No tax

£150k - £250k

2.5%

£150k - £250k

1%

£250k - £400k

5%

£250k - £1m

5%

£400k - £750k

7.5%

Above £1m

6%

£750k - £1.5m

10%

 

Above £1.5m

12%

Where properties sell for less than £150,000 the new threshold is beneficial. However, an impact will be felt for more expensive property. For residential properties, only those of £400,000 and under - will pay the same amount of LTT as they would under SDLT. For non-residentials, such as farms, properties with a value of £1.1m will pay more LTT than SDLT. It won’t only affect house-sellers and buyers, but also builders, developers and agents. It will affect that vital calculation made by landowners looking at the feasibility of land for residential development. The additional 3% rate of the old SDLT on purchases of additional residential properties (including second homes) came into effect back in April 2016. This will continue. However the relief for first-time buyers introduced for SDLT in the December 2017 Budget will not be introduced for LTT.

In April 2019 a Welsh rate of income tax will be introduced. At the same time the UK government will reduce each of the three rates of income tax paid by Welsh taxpayers. The combination of the two will determine an overall rate paid by Welsh taxpayers.

More Welsh taxes have already been mooted. In February we responded to the proposal by the Finance Minister, Mark Drakeford, to develop proposals for a Vacant Land Tax. This was suggested to “test the powers of the Wales Act, 2014,” but it is also aimed at releasing land which is suspended from development in the hands of developers. We wrote to the Finance Minister explaining that rural landowners should not be disadvantaged by a measure which is actually targeted elsewhere. Even farmers and other rural businesspeople could be the victims of this. As the main providers of homes in rural Wales, targeting this group would be counter-productive.

The high principles of devolution are playing a major role in defining the future of farming and environment policy in Wales as the post-Brexit scenario unfolds. However, we’re not losing sight of how this impacts our businesses in the field. For most of our members, how it hits our pockets is as important as where our heart lies.

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