Stamp Duty Land Tax revisited (for the third time!)

16 March 2018

If you thought tax was supposed to be getting simpler think again. From 1 April 2018 (and unfortunately this is no joke) Stamp Duty Land Tax (SDLT) will be abolished in Wales and replaced with Land Transaction Tax (LTT) or ‘Deddf Tref Trafodia dau Tir’ as it is known locally. This new tax will be managed not by HMRC but by the new Welsh Revenue Authority or WRA. From that date we will therefore have three property transaction taxes in the UK: SDLT in England and Northern Ireland; Land and Buildings Transaction Tax (LBTT) in Scotland; and LTT in Wales.

The good news is that the rules for all three taxes are broadly the same, though there are some real differences. The rates and thresholds at which each rate is paid are all different however with the result that the cost of purchasing a property will now be different in all three regions of the UK. The additional 3% for second residential purchases will still apply for LTT as will most of the reliefs (though critically not the first-time buyers relief) and the table below shows the tax payable on the purchase of a residential property (without the additional 3%)

Cost (£) Wales Eng/NI Scotland
180,000 0 1,100 700
200,000 700 1,500 1,100
300,000 4,950 5,000 4,600
400,000 9,950 10,000 13,350
600,000 24,950 20,000 33,350
800,000 41,200 30,000 54,350
1,000,000 61,200 43,750 78,350

LTT will be the cheaper tax at the lower end of the market but will be more costly than SDLT as prices increase with LBTT being far and away the most penal on expensive property purchases.

And if you thought that was complicated enough, spare a thought for those buying properties that straddle the border (of which there are a surprising number). Cross-border cases will have to be apportioned in what is described as a ‘just & reasonable’ basis and returns made and tax paid to both HMRC and the WRA! Further guidance is to come on how this will work and what will happen if the two authorities disagree on the justness and reasonableness of the apportionment!

If you have any questions regarding SDLT, LTT or LBTT, or any other tax-related issues, please contact your local UHY tax expert or your usual UHY adviser.