Tax hikes for property sales in Wales

23 Dec 2020

The Welsh Government published its draft budget for 2021-22 on Monday 21 December.

Minister for Finance Rebecca Evans said the budget's ‘progressive measures will support businesses, economy and boost funding for public services in the wake of the COVID-19 crisis.

Income tax

The Welsh Government has made a commitment not to raise Welsh Rates of Income Tax during this Senedd (parliament). And the Welsh Government’s commitment to raise awareness of Welsh taxes, and link this tax with public spending, will see the website enable a Welsh Income Tax taxpayer to calculate their Welsh Rates of Income Tax liability and see how that money is spent delivering public services in Wales.

Land transaction tax

With effect from tomorrow (22 December), subject to subsequent Senedd approval, Evans will raise each of the higher residential rates tax bands of Land Transaction Tax by one percentage point. Buyers of residential properties liable to pay the higher residential rates will now pay an additional four per cent (up from three per cent) of the cost of the property over and above the main residential rates. It will see second home-owners paying a four per cent levy when they buy properties up to £180,000, rising to 16 per cent for homes worth at least £1.6 million.

Evans is lifting the starting threshold on the Land Transaction Tax paid on non-residential property purchases by 50 per cent. Businesses will now, in the main, pay no tax on purchases costing up to £225,000, she said.

The Welsh Government will not be extending the current Land Transaction Tax temporary tax reduction introduced in July for tax paid on, broadly, residential properties to be used as a main residence beyond the planned end date of 31st March 2021. Evans said: “We were clear this was a temporary measure to support the housing market in an unprecedented time. A return to the rates and bands which existed prior to 27 July will mean, again, Wales will be the only country in the UK with a starting threshold which is higher than the average price of a home. This means the majority of homebuyers will still not be liable for Land Transaction Tax and maintains this Government’s progressive approach to taxation.”

Landfill Disposal Tax

From 1 April 2021, the Landfill Disposal Tax rates will rise in line with inflation.

Spending headlines

  • £200 million investment in affordable and social housing next year
  • £40 million extra for the Housing Support Grant to address homelessness
  • £40 million for improving education infrastructure
  • £20 million to support active travel
  • £274.7 million investment in rail and metro

Political reaction

Welsh Conservatives’ Shadow Finance Minister Nick Ramsay MS said: “This budget is clearly a missed opportunity to build back better and represents more of the same from this tired Welsh Labour Government. The Welsh Government had an opportunity today but has failed to deliver a recovery plan for Wales. Instead of promoting aspiration and opportunity, they want to go back to taxing homeowners when they buy a house worth between £180,000 and £250,000. And instead of supporting our young people by giving them the funding they need, the Welsh Government is spending £8.3 million on curriculum reform in Wales, and not delivering the basics to improve our education rankings on the UK and international stage.”

While Wales received an extra £5 billion in funding from the UK Government this year to deal with the pandemic, this will fall to £766 million in 2021-2022.

Plaid Cymru finance spokesman Rhun ap Iorwerth called for more money to be given by the UK Government. He said: “The block grant allocated to Wales by Westminster is wholly inadequate to meet the unprecedented challenges facing our nation. During this pandemic, inequality has shown itself to be widespread in Welsh communities. Urgent action is needed to rebalance our economy, to lift children out of poverty, and to recognise the essential contribution of our front-line workers.”

Read Evans’ written statement on Welsh Devolved Taxes and Welsh Rates of Income Tax - Draft Budget 2021-22

Due to the external factors which have influenced the timing of this year’s budget, the Welsh Government has, with the agreement of the Senedd’s Business and Finance committees, triggered exceptional arrangements in relation to this year’s budget process. It means instead of publishing a two-stage budget, this year the draft budget 2021-22 will combine the strategic spending plans for revenue and capital; taxation and borrowing proposals and the detailed portfolio budget proposals. The Senedd will debate the draft budget on 9 February and vote on 9 March.

By Hamant Verma.