Tweaks Made To Land Taxation

December 21, 20220

Last week’s Welsh Budget saw income tax rates stay the same as in England and Northern Ireland, but second-home buyers could be hit by the higher rates for land transaction tax.

In the Welsh Budget, income tax rates remain in step with England and Northern Ireland, but buyers of second homes could be caught out by the higher rates for land transaction tax.

The Welsh Government has limited tax-raising powers, fewer even than the Scottish Parliament. Income tax is only partially devolved to Wales, it is a shared tax.

Income Tax

The Welsh rates of income tax (WRIT) regime allows the Welsh Government to take the rates of income tax that apply in the rUK (rest of the UK, apart from Scotland) reduce them by 10 percentage points, then add the appropriate rate of WRIT.

The Welsh Government cannot vary the income tax bands, as Scotland can. Through a vote at the Senedd, the Welsh Government decides whether to set WRIT at 10p, thereby retaining parity between Welsh and English Taxpayers, or to set different rates.

In the Budget statement delivered on 13 December, Rebecca Evans, Welsh Finance Minister, announced that the Welsh government has decided once more to set the rate of WRIT at 10% for 2023/24, maintaining current levels and parity with rUK rates.

  • 20% – 10% + 10% WRIT = 20%
  • 40% – 10% + 10% WRIT = 40%
  • 45% – 10% + 10% WRIT = 45%

As the tax bands for income tax in Wales are set in Westminster, the reduction in the additional rate threshold also applies to Welsh taxpayers, giving the following bands and rates.

Band and rate 2022/23 2023/24
Basic rate: 20% Up to £37,700 Up to £37,700
Higher rate: 40% 37,701 – £150,000 37,701 – £125,140
Additional rate: 45% Over £150,000 Over £125,140

Devolved Taxes

There are currently only two fully devolved taxes in Wales:

These land-related taxes tend to follow the trends, if not the full rates, of the English and Northern Irish versions of those taxes.

Land Transaction Tax

On 23 September 2022, in his infamous mini-Budget Chancellor Kwarteng raised the threshold at which stamp duty land tax (SDLT) applies to the purchase of residential properties to £250,000. This change took effect immediately and has not been reversed, yet. However, in his Autumn Statement Chancellor Hunt indicated this effective tax cut for home buyers will have a limited shelf-life, and he intends to restore the lowest SDLT band in April 2025.

The Welsh Government leapt on Kwarteng’s SDLT changes and amended the bands for the main rates of LTT with effect for purchases completed on and after 10 October 2022.

Wales also has a set of higher rates for residential LTT, which apply to the purchase of second homes, and where the property is purchased by a company. In rUK and Scotland the similar higher rates of SDLT and land and building transaction tax (LBTT) are made up of the main rate plus an additional rate or supplement. Scotland has just increased its LBTT additional dwellings supplement from 4% to 6%, whereas the SDLT supplement in rUK still just 3%, although an additional 2% applies on top of that for non-resident purchasers.

The LTT additional rate is 4%, but the combined effective higher rates apply on the valuation bands as existed before 10 October 2022.

Property value band LTT higher rate
Up to £180,000 4%
£180,001 to £250,000 7.5%
£250,001 to £400,000 9%
£400,001 to £750,000 11.5%
£750,001 to £1,500,000 14%
Over £1,500,000 16%

Landfill Disposals Tax

The Welsh Government is free to set its own rates and bands of LDT, but it chooses to align the rates with the similar rUK landfill tax, as has the Scottish Government with its own landfill tax.

Rate of LTD Amount per tonne from 1 April 2023 
Standard £102.10
Lower £3.25
Unauthorised disposals (AKA fly tipping) £153.15

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