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A new Bill will introduce the first Welsh tax in almost 800 years – land transaction tax, which will be a replacement for stamp duty land tax.

First published:
12 September 2016
Last updated:

This was published under the 2016 to 2021 administration of the Welsh Government

The Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Bill is the first Bill to be introduced as part of the Welsh Government’s new Legislative Programme.

Like stamp duty land tax, land transaction tax will be payable on the purchase or lease of a building or land in Wales over a certain price. It will affect house buyers and businesses, including builders, property developers and agents involved in the transaction process (such as solicitors and conveyancers).

In 2014-15, £170m was raised from stamp duty land tax in Wales, with 55,000 transactions taking place. This is expected to rise to £244m by 2018-19. If the Bill is passed, land transaction tax will replace stamp duty land tax in Wales in April 2018.

The Bill sets out the key principles of the new tax, including the types of transactions, the procedure for setting rates and bands, how the tax will be calculated, and what reliefs will apply. It also introduces measures to tackle tax avoidance.  

Land transaction tax broadly mirrors stamp duty land tax, providing consistency and stability for businesses and home buyers in Wales but it introduces some changes, which are designed to improve efficiency and to reflect unique Welsh circumstances and priorities.  

Key changes include:

  • A new overarching general anti-avoidance rule (GAAR) to help prevent and robustly tackle tax avoidance;
  • A broad targeted anti-avoidance rule (TAAR) which applies to all reliefs;
  • The exclusion of two reliefs in relation to the demutualisation of insurance companies and building societies;
  • Amendments to some other reliefs so they operate better or in a more relevant way to Wales;
  • The rent element of new residential leases will be exempt from tax under LTT;
  • The simplification of rules in relation to leases.

An announcement about the rates and bands for land transaction tax will be made closer to April 2018, taking into account economic conditions and priorities at the time.  

A research paper about rates and bands, which provides wider context about those used for stamp duty land tax in England and Wales and land and buildings transaction tax in Scotland, will be published on Thursday.

Finance Secretary Mark Drakeford said:  

“This is an historic milestone in the devolution of tax powers to Wales. This Bill marks another step towards the creation of taxes which are more suited to the needs of Wales and support Welsh public services.  

“This is a tax which affects so many of us. By replacing stamp duty land tax with a new made-in-Wales land transaction tax, public services in Wales will continue to benefit from the revenues raised by this important tax.

“We have consulted widely about how this tax should work for Wales and listened to a range of views. This is why it will broadly mirror stamp duty land tax, providing the consistency and stability business tell us they need and providing a smooth transaction for home buyers and the property market. We have also been able to learn from the devolution of the tax to Scotland. 

“But we have also been able to use the opportunity that tax devolution presents to make some changes to improve efficiency, effectiveness and to focus on Welsh circumstances and priorities. The Bill is in line with our clear principles for taxes in Wales – to create a fairer and simpler system, which supports jobs and growth.”

The Bill is expected to be introduced to the National Assembly today and the Cabinet Secretary will make a Legislative Statement about the Bill during Plenary in the Senedd tomorrow.