Ministers mull hike in land tax on 2nd homes
CONSERVATIVES SAY THAT THE TAX IS BAD ENOUGH FOR SMALL BUSINESSES AS IT IS
THOSE planning to buy a holiday home in Wales could end up paying a higher rate of Land Transaction Tax [LTT] under proposals being considered by ministers.
A consultation has been launched on hiking the Welsh version of stamp duty on property sales involving planned second homes or short-term holiday lets.
But while such changes could be implemented on a Wales-wide basis, the study – based on the findings of a report by Dr Simon Brooks – will also consider introducing hikes only in areas where second homes are thought to be pushing up house prices and/or impacting on Welsh-speaking communities.
Those looking to buy such properties in Wales already have to pay a minimum of 4% duty on top of that payable for their band – increased from 3% since December 2020.
This higher LTT rate is activated when a house is sold to someone already owning another property, which in addition to holiday homes can also include those buying houses to rent them out and also someone still trying to sell their original home.
While 4% is payable on properties sold for up to £180,000, the rate rises to 7.5% on sales of between £180,000 and £250,000 and on a sliding scale of up to 16% on dwellings changing hands for £1.5m or more.
“LTT is an episodic tax, only chargeable at the point of purchase, it is, therefore, likely to have a limited impact in the short to medium term on the existing proportion of short-term holiday lets or second homes in a community,” note the consultation documents.
“However, it might help to reduce the number of future purchases and over the longer term it may be helpful as part of a wider suite of responses to address issues associated with second homes.”
During 2020/21 in Gwynedd, where 1,920 residential property transactions were recorded, 720 resulted in the buyers paying the higher tax rate (37.5%). But in Dwyfor Meirionnydd the figure was 44%.
Broken down further, 590 sales in Gwynedd were as individual purchases for someone not planning to use it as a main residence (30.7% of all property sales), as opposed to still trying to sell their previous home or being bought by a company.
Anglesey saw the second highest figure, with 410 of the 1,210 property transactions paying the highest rate (33.88%), 320 for properties not designed to be used as a main residence (26.4%).
Housing Minister Julie James said all second home owners should be making a “fair contribution to the communities in which they buy property” and suggested more stringent checks and potential changes to local taxes.
Mabon ap Gwynfor, the Plaid Cymru MS for Dwyfor Meirionnydd, said the hike to 4% “has not gone far enough”.
He said: “In Gwynedd the numbers show second homes are causing house prices to continue to increase and we’ve consistently called for the LTT to be tripled on the purchase of second homes.
“Whilst a distinction needs to be drawn between locally owned holiday lets that provide for the local tourist economy, the proliferation of second home ownership to be used for a few weeks a year by people who reside elsewhere the majority of the time is bad for our communities, bad for tourism and bad for our economy.”
But Welsh Conservatives have opposed the existing higher levels of LTT, claiming it “penalises small and medium businesses.”
Speaking in the Senedd, North Wales MS Mark Isherwood said they’re already higher than the equivalent ‘Stamp Duty Land Tax’ Higher Rates in England for all purchases above £180,000.
He added: “The Welsh Government should stop blaming the affordable housing shortage in holiday home hotspots on legitimate local businesses and second home ownership, and start taking responsibility for causing the social and affordable housing supply crisis in Wales from devolution in 1999, despite repeated warnings.”