The Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Act 2017 (Amendments to Schedule 5) Regulations 2026: integrated impact assessment

This Integrated Impact Assessment (IIA) relates to the following draft statutory instrument (SI):

The Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (Amendments to Schedule 5) Regulations 2026

The Welsh Government is proposing legislative amendments to the Land Transaction Tax and Devolved Tax Avoidance (Wales) Act 2017 ("LTTA 2017"). The Land Transaction Tax and Anti-Avoidance of Devolved Taxes (Wales) Act 2017 (Amendment of Schedule 5) Regulations 2026 (the "Regulations") provide a new refund rule for transactions subject to higher residential rates of land transaction tax.

The draft SI will be laid in the Senedd alongside the associated Explanatory Memorandum (EM), which includes the Regulatory Impact Assessment (RIA).

Impact and the proportionate approach

In accordance with Welsh Government IIA guidance and practice, a proportionate approach has been taken to this IIA. Leasing Scheme Wales (LSW) is a Welsh Government scheme which is contributing towards the delivery of affordable homes. The aim of the new HRRLTT refund is to incentivise increased sign-up to LSW and support the provision of housing to Welsh LAs for use as affordable rental accommodation.

As the proposed regulations are designed to incentivise increased sign-up to LSW, this IIA relies, and where necessary, builds on the IIA for LSW and the IIA for the White Paper on Adequate Housing, Fair Rents, and Affordability. The White Paper set out the policy proposal to explore introducing, by way of amendments to legislation, a refund of the HRRLTT, where a person buys a property and then leases it to a LA through LSW.

The focus of this assessment therefore is limited to the regulatory change relating to the HRRLTT refund. While the policy aim is linked to LSW, detailed analysis of the wider impacts of LSW itself are outside the scope of this document.

Leasing Scheme Wales: integrated impact assessment

The Welsh Government is proposing legislative amendments to the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (“LTTA 2017”). The Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (Amendments to Schedule 5) Regulations 2026 (the “Regulations”) provide a new refund rule for transactions that are subject to the higher residential rates of land transaction tax (“HRRLTT”).

The new HRRLTT refund will apply where a person (the taxpayer) buys a dwelling costing £400,000 or less which is liable to HRRLTT, and then leases it to a Welsh local authority (“LA”), within 18 months of that purchase, and the lease meets the other conditions in the Regulations (the conditions have been designed to ensure that leases granted to LAs under the Leasing Scheme Wales (“LSW”) qualify for the refund (The refund is, however, only a partial refund. Where the conditions in the regulations are met, the transaction is treated as if it were not subject to the HRRLTT, but rather subject to the main residential rates of LTT and the taxpayer is then entitled to claim a refund, that will generally be equal to the difference).

LSW is a Welsh Government scheme which is contributing towards the delivery of affordable homes. The aim of the proposed HRRLTT refund regulations is to help incentivise increased sign-up to LSW and support the provision of housing to Welsh LAs for use as affordable rental accommodation. In particular, as part of tackling the impact of homelessness and the use of temporary accommodation (“TA”).

A good quality and affordable home brings a wide range of benefits to health, learning and prosperity. Having access to a greater stock of good quality, affordable housing will be a key driver in helping meet the needs of the people of Wales. The provision of affordable housing will help those in most need and consequently help to tackle poverty. LSW directly contributes to the Programme for Government commitment to:

“Develop a national scheme restricting rent to local housing allowance levels for families and young people who are homeless or who are at risk of homelessness.

(Programme for government - update 2021)

In terms of the Five Ways of Working by the Well-Being of Future Generations (Wales) Act 2015, the proposed HRRLTT refund regulations will:

• Long term - As part of the long-term commitment to end homelessness, the Welsh Government is seeking to reduce reliance on TA by increasing the supply of suitable longer-term homes. Incentivising increased sign-up to LSW is therefore aimed at increasing supply of affordable homes over the long term to tackle the impact of homelessness and reduce the use of TA.
• Prevention - The policy aim of the proposed HRRLTT refund is to incentivise increased sign-up to LSW and support the provision of housing to LAs for use as affordable rental accommodation as part of tackling the impact of homelessness and the use of temporary accommodation.
• Integration - An adequate home is the foundational building block for ensuring all people can fulfil their potential regardless of their background, including their socio-economic circumstances. Increased sign-up to LSW aims to address concerns around housing cost induced poverty, including communities where families and young people are priced out of the private rental market. LSW also addresses the mental and physical health issues associated with poor quality housing and tackles inequalities and poor life chances associated with living in insecure, poor-quality accommodation. A secure, affordable, home has significant benefits for well-being and quality of life more generally.

Collaboration and involvement

In June 2023, the Welsh Government published a Green Paper: Call for Evidence on securing a path towards adequate housing, including fair rents and affordability.

The Green Paper sought to gather evidence to better understand the Private Rented Sector (PRS) in Wales, including landlord and tenant behaviour, and the longer-term changes that may be needed in the sector.

Evidence submitted to the Green Paper indicated that increasing the supply of affordable homes is a key part of progressing towards achieving housing adequacy in Wales. A number of respondents to the Green Paper called for the Welsh Government to consider providing an LTT refund to increase the supply of private rental property as part of promoting a re-balancing between supply and demand in the PRS.

The Welsh Government's approach to tax policy development is underpinned by the Tax Policy Framework and the Tax Policy Framework update which takes the opportunity to identify and articulate the distinct Welsh approach to developing and delivering tax policy collaboratively, involving stakeholders and partners. It sets out how we will ensure we continue to embed sustainability, fairness and equality considerations in the way in which we address our priorities. Therefore, tax changes in this area, that result in a reduction in Government tax receipts, should not be made primarily for the benefit of private investors, rather it should be about “something for something” that will be for the benefit of the public and the more vulnerable sections of society needing support.

In October 2024, the Welsh Government published a White Paper on securing a path towards Adequate Housing, Fair Rents, and Affordability:

The White Paper set out the proposal to explore introducing, by way of amendments to legislation, a refund of the higher residential rates of LTT where a private landlord buys a property and then leases it to a LA through LSW. The main residential rates of LTT would continue to apply to the transaction. The stated policy aim of the HRRLTT refund was to help incentivise increased sign-up to LSW and support the provision of housing to LAs for use as affordable rental accommodation and thereby tackling the impact of homelessness.

The initial findings from the White Paper consultation, showed that of those who expressed a view, there is a small majority of respondents who are supportive of the proposed LTT refund. This included several LAs.

The Welsh Government does not directly deliver affordable housing as it is more efficient to work with partner organisations who do this already. Therefore, the Welsh Government works in partnership with LAs, RSLs and the PRS to deliver housing on their behalf. In 2022, the Welsh Government introduced measures to increase the supply of affordable housing through the introduction and funding of Leasing Scheme Wales (LSW).

LSW aims to increase the access to, and the affordability of, renting privately in Wales by providing landlords and empty homeowners the opportunity to lease their property to a LA. The Welsh Government wants to incentivise people to sign-up to LSW. The main aim of the new HRRLTT refund regulations is to help incentivise increased sign-up to LSW and support the provision of housing to LAs for use as affordable rental accommodation, as part of tackling the impact of homelessness and the use of temporary accommodation (TA).

Costs and savings

The policy aim of the proposed HRRLTT refund is to incentivise increased sign-up to LSW. Therefore, it is difficult to forecast how many properties may come forward to LSW as a direct result of the HRRLTT refund, which in turn causes difficulty when estimating the tax revenue foregone by providing the refund. To give an indication of the costs, a number of scenarios have been tested and are set out in the EMRIA.

The EM/RIA illustrates that over the LSW minimum 5-year lease period the benefits in cost savings by avoiding TA costs compared to the reduction in LTT revenues. For example, the estimated cost saving of housing two people in a LSW dwelling over the 5-year lease period rather than TA is £31,646. If the property costs £180,000 to purchase the HRRLTT refund would be £9,000. The overall cost saving would still be £22,646 over the 5-year lease period, after the reduction in the tax revenues.

The social benefits for tenants having longer term security of tenure in their home (especially for families with children) is also considered to be significant. Reports by the Bevan Foundation and Shelter Cymru (Nowhere to call home - living in temporary accommodation and The impact of temporary accommodation on children and their families) demonstrates why more permanent, affordable and suitable housing is needed to enable people to move out of TA and into a stable, long-term home. The reports conclude that too many people live in TA that is unsuitable for their needs, and that they live there far too long. Placing ever-increasing numbers of people in TA is also not sustainable for LAs. Moving people into suitable homes is key to reducing the pressure on services, as well as enabling lives to be rebuilt after the trauma of homelessness. Social homes provide long-term security, affordable, regulated rents and peace of mind for the future. Making sure that everyone in TA can access them is crucial.

Although difficult to cost, a recent report prepared for Homes England looked at understanding how wellbeing changes when an individual moves from TA into social housing. The analysis suggests that there are statistically significant differences in self-reported life satisfaction between residents of TA and social housing. Tenants who moved from TA to social housing reported a marked improvement in overall life satisfaction, including improved mental health and reduced stress, better access to services and support, enhanced privacy and personal space and a positive impact on children.

The report also quantifies the wellbeing improvement for people transitioning from TA to social housing. The tables below show the estimated monetary value of the increase in life satisfaction for adults (Table 1) and Children (Table 2) who move from temporary accommodation into social housing.

Table 1: Wellbeing Uplift Monetised Values (2024 prices, per adult, per annum):

• Average life satisfaction change (respondents living in social housing relative to those living in temporary accommodation) - +0.86
• Low - £10,593
• Central - £13,771
• High - £16,949

(Source: Homes England – Measuring Social Value Paper 6: Measuring the Wellbeing Impacts of Temporary Accommodation & Social Housing (SQW), July 2025)

Table 2: Wellbeing Uplift Monetised Values (2024 prices, per child, per annum)

• Average happiness change (respondents living in social housing relative to those living in temporary accommodation) - +1.01
• Low - £12,410
• Central - £16,133
• High - £19,856

(Source: Homes England – Measuring Social Value Paper 6: Measuring the Wellbeing Impacts of Temporary Accommodation & Social Housing (SQW), July 2025)

1. Policy objectives

It is proposed to introduce, by way of amendments to the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017, a refund of the higher residential rates element of Land Transaction Tax (HRRLTT) where a person buys a property and then leases it to a Welsh local authority (LA) through Leasing Scheme Wales (LSW). The main residential rates of LTT would continue to apply to the transaction.

The policy objective of the proposed HRRLTT refund is to incentivise increased sign-up to LSW, supporting the provision of housing to LAs for use as affordable rental accommodation. This forms part of the Welsh Government’s aim to address the impact of homelessness and use of temporary accommodation (TA). LSW is a Welsh Government initiative which directly contributes to the Programme for Government commitment to:

“Develop a national scheme restricting rent to local housing allowance levels for families and young people who are homeless or who are at risk of homelessness.

(Programme for government: update)

As part of the long-term commitment to end homelessness, the Welsh Government is seeking to reduce reliance on TA by increasing the supply of suitable longer-term homes. Incentivising increased sign-up to LSW is therefore aimed at increasing supply of affordable homes to reduce the use of TA. This will both help to reduce the significant costs to LAs of TA and the detrimental impact of homelessness on individuals, including children, and families.

Although the proposed HRRLTT refund itself will not directly impact children, there may be secondary positive impacts on children and young people. By helping to incentivise increased numbers of dwellings to be available through LSW this will increase access to secure, stable housing. By reducing reliance on temporary accommodation, families with children will benefit from improved living conditions that support health, education, and emotional well-being. As set out in the LSW IIA, evidence consistently shows that safe and permanent homes provide children with a stronger foundation for development, reduce stress and instability, and enhance family resilience. This policy and proposed legislation therefore contributes to mitigating the adverse effects of homelessness on children and supporting improved long-term outcomes.

2. Gathering evidence and engaging with children and young people

The social benefits of tenants having longer term security of tenure in their home (especially for families with children) is considered to be significant. A recent report by the Bevan Foundation shows that as of June 2025, 2,604 children aged under 16 in Wales were living in temporary accommodation. The report describes how temporary accommodation can have significant negative impacts on children and their families. These themes are echoed in a report by the Children’s Commissioner for Wales on how housing and homelessness affects children in Wales. Secure, adequate housing is essential for children’s physical health, emotional stability, and educational success. Poor housing conditions and homelessness undermine these outcomes.

A recent report prepared for Homes England also looked at understanding how wellbeing changes when an individual moves from temporary accommodation into social housing. The analysis suggests that there are statistically significant differences in self-reported life satisfaction between residents of temporary accommodation and social housing. Tenants who moved from TA to social housing reported a marked improvement in overall life satisfaction, including improved mental health and reduced stress, better access to services and support, enhanced privacy and personal space and a positive impact on children.

The report also quantifies the wellbeing improvement for people transitioning from temporary accommodation to social housing. The estimated monetary value of the increase in life satisfaction for children is shown in table 1.

Table 1: Wellbeing Uplift Monetised Values (2024 prices, per child, per annum)

• Average happiness change (respondents living in social housing relative to those living in temporary accommodation) - +1.01
• Low - £12,410
• Central - £16,133
• High - £19,856

(Source: Homes England – Measuring Social Value Paper 6: Measuring the Wellbeing Impacts of Temporary Accommodation & Social Housing (SQW), July 2025)

3. Analysing the evidence and assessing the impact

The Rights of Children and Young Persons (Wales) Measure 2011 places a duty on the Welsh Ministers to pay due regard to the United Nations Convention on the Rights of the Child (UNCRC) and its Optional Protocols when exercising any of their functions.

In developing our proposal, we have considered the impact it could have on children’s rights as set out under the UNCRC. The following articles are relevant in the context of the proposed HRRLTT refund regulations:

Article 2: Non-discrimination

The convention applies to everyone whatever their race, religion, abilities, whatever they think or say and whatever type of family they come from.

Impact

Potential positive (indirect) impact via increased availability of affordable housing through LSW, benefiting children from all backgrounds, reducing inequalities in access to secure homes.

Article 3: Best interests of the child

All organisations concerned with children should work towards what is best for each child.

Impact

While the proposed measures mainly target landlords and local authorities, they affect children’s access to stable, affordable housing. Stability is considered a core component of promoting children’s best interests and consideration has been given to the impact or indirect impact on children’s welfare.

Article 12: Right to have a say

Children have the right to say what they think should happen, when adults are making decisions that affect them, and to have their options taken into account.

Impact

No direct engagement with children and young people has been undertaken for this policy proposal. Evidence from the Children’s commissioner for Wales report on housing and homelessness which heard the views of children and young people was used to inform this assessment.

Article 27: Adequate standard of living

Every child has the right to a standard of living that is good enough to meet their physical and social needs and support their development. Governments must help families who cannot afford to provide this.

Impact

Potential positive (indirect) impact by helping to incentivise increased numbers of dwellings to be available through LSW, which will increase access to secure, stable housing. By reducing reliance on temporary accommodation, families with children will benefit from improved living conditions that support health, education, and emotional well-being.

4. Ministerial advice and decision

This assessment has been approved at Deputy Director level, and the Cabinet Secretary for Finance and Welsh Language will be informed about the assessment.

5. Publication of CRIA

This assessment is being published on the Welsh Government website.

6. Communicating with children and young people

No direct engagement with children and young people has been undertaken at this stage. This is due to the technical nature of the proposal and the limited time available for development. The policy proposal is aimed at landlords and local authorities rather than children themselves. Nevertheless, we acknowledge that the outcomes will affect children’s access to housing and stability.

7. Monitoring and review

Post-implementation monitoring to assess the effectiveness of the regulations will include analysis of data reflecting interest in and take-up of the refund opportunity. Claims will be monitored by the WRA on an ongoing basis.

There is a sunset clause of 5 years for this refund. The aim is for the proposed HRRLTT refund to come into effect before 31 March 2026, therefore, a sunset date is to be set at 31 March 2031. This, in conjunction with the ongoing monitoring, will give the Welsh Ministers the opportunity to review the refund and renew if it is achieving its purpose. It will be for a future Welsh Government to consider whether it wishes to renew the refund opportunity, in the lead up to the sunset clause end date.

If required, officials will revisit the published version of their CRIA and update any evidence of impact. This review CRIA would also be published.

8.1 How have people most likely to be affected by the proposal been involved in developing it?

The White Paper consultation on Adequate Housing, Fair Rents, and Affordability was published on 24 October 2024 and closed on 31 January 2025.

The White Paper set out a proposal to explore introducing, by way of amendments to the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 (the LTTA), a refund of the higher residential rates of land transaction tax (the HRRLTT) where a person buys a dwelling and then leases it to a Welsh local authority through LSW.

The White Paper outlined that the policy aim of the HRRLTT refund is to help incentivise increased sign-up to LSW and support provision of housing to local authorities for use as affordable rental accommodation, as part of tackling the impact of homelessness and the use of TA.

The initial findings from the White Paper consultation, showed that, of those who expressed a view, there was a small majority of respondents who were supportive of the proposed LTT refund, including several local authorities (summary of responses).

As part of the evidence gathering to support the White Paper consultation, a series of workshops were held in January 2025. A workshop for landlords and agents was held in Cardiff and Llandudno. A workshop for Private Rented Sector tenants was held in Cardiff.

A public consultation was not undertaken on the refund draft Regulations for the proposed HRRLTT refund; however, officials undertook focussed technical engagement with external tax advisors to test the regulations. This engagement was undertaken over a 2-week period, which included a meeting with the external tax advisors.

8.2 What are the most significant impacts, positive and negative?

The integrated impact assessment builds on the existing research and evidence provided in the LSW IIA. The LSW scheme has a beneficial impact on the people, culture and Welsh language, economy and environment of Wales. The HRRLTT refund will incentivise property owners to lease homes to local authorities through LSW, increasing the supply of affordable, good quality rental accommodation across Wales. This supports the Welsh Government’s long-term commitment to end homelessness and reduce reliance on TA.

A key theme throughout the IIA is that the proposed refund will incentivise the take up of LSW and support an increased availability of stable, secure housing through LSW. The policy will positively (indirectly) benefit children, young people and their families, supporting their health, education, and emotional well-being. Evidence shows that moving from TA to permanent housing improves life satisfaction and outcomes for both adults and children.

The proposed HRRLTT refund is also anticipated to have a positive fiscal impact, offering potential cost savings for the Welsh Government through decreased reliance on expensive TA. These projected savings are expected to outweigh any reductions in tax revenue and, over time, mitigate the risk of increasing temporary accommodation costs.

The proposed HRRLTT refund works towards the 7 goals and 5 ways of working of the Well Being of Future Generations (Wales) Act 2015 by helping to provide greater security of accommodation for tenants that will contribute towards a Healthy and more Equal Wales, a Wales of Cohesive Communities, and a Wales of vibrant culture and thriving Welsh language. This is demonstrated by the clear health benefits of having a good quality home which is affordable and located in a safe environment.

This proposal will be delivered and adhere to the Welsh Language Standards.

8.3 In light of the impacts identified, how will the proposal:

• maximise contribution to our well-being objectives and the 7 well-being goals, and/or

• avoid, reduce or mitigate any negative impacts?

The proposed HRRLTT refund will be beneficial as it has the potential to help some of the more disadvantaged and vulnerable people in society to access affordable and suitable accommodation.

8.4 How will the impact of the proposal be monitored and evaluated as it progresses and when it concludes?

Post-implementation monitoring to assess the effectiveness of the legislation will include analysis of data reflecting interest in and take-up of the refund opportunity. There is a sunset clause of 5 years for this refund. The aim is for the proposed HRRLTT refund to come into effect before 31 March 2026, therefore, a sunset date is to be set at 31 March 2031. Claims will be monitored by the WRA on an ongoing basis. This, in conjunction with the ongoing monitoring, will give the Welsh Ministers the opportunity to review the refund and renew if it is achieving its purpose. It will be for a future Welsh Government to consider whether it wishes to renew the refund opportunity, in the lead up to the sunset clause end date.