The Welsh Government has followed its counterparts in England and Scotland and raised the stamp duty that landlords buying rental properties must pay, effective from tomorrow.

Mark Drakeford (main image), who used to lead the Welsh Government but is now the Cabinet Secretary for Finance, revealed in parliament that the country’s draft budget will include a 1% increase in Land Transaction Tax for landlords, which is its equivalent to 'additional homes stamp duty' in England and Northern Ireland, for landlords with immediate effect.

He also revealed that a loophole in the country’s Land Transaction Tax rules, which enable some investors to claim both multiple dwelling relief and a ‘subsidiary dwelling exemption’ which he described as a ‘current unfairness’.

Tax bands

At the moment, depending on the value of the property being bought by a landlord, rates for Land Transaction Tax start at 4% for the first £180,000 and then rise to 16% for any value over £1.5 million, all of which will now rise.

Drakeford, who also revealed increased spending on affordable homes, justified the increase saying that the increase bring rates “broadly into the line with changes to stamp duty land tax across our border, and…is expected to raise an additional £7 million for public services next year”.

For England and NI, Chancellor Rachel Reeves recently increased the extra stamp duty that landlords pay on properties by 2% to 5%. And in Scotland, this was raised last week to 8%.

Reaction

Ben Beadle (pictured), Chief Executive at the National Residential Landlords Association, says:  “This move by Welsh Government will do nothing to help renters who are already struggling to find a home to rent.  

“To discourage investment in the market with punitive taxation, at a time when Wales needs many more homes for rent, is a frankly baffling move.

“Today’s announcement will worsen the ongoing shortage of homes, narrow tenant choice, increase rents and cause misery for tenants.”

Tim Thomas (pictured), Policy and Campaigns Officer at Propertymark, says: “Propertymark is disappointed that Land Transaction Tax for additional properties has increased by 1%.

“The investment in affordable and social homes is welcome, but until social housing supply keeps up with demand, we called for the surcharge on additional properties to be cut to stimulate supply in the private rented sector.

“However, is encouraging that the Welsh Government has listened to our call for fair funding for local authorities in Wales given the requirements of enforcing the Renting Homes (Wales) Act and proposed Building Safety Act. This increase in funds must be used for these additional legislative challenges for the housing sector."

The introduction of the new tax is also immediate – a landlord completing on a BTL purchase today will pay 1% less Land Transaction that a counterpart completing tomorrow.

The new rates

 £0 - £180,000 – 5%  

 More than £180,000 - £250,000 – 8.5%

 More than £250,000 - £400,000 – 10%  

 More than £400,000 - £750,000 – 12.5%

 More than £750,000 – £1.5m - £15%

 Above £1.5m - 17%