In May 2016, representatives from Welsh Government said the proposed new Land Transaction Tax (LTT) for Wales would be 'broadly consistent' with the existing stamp duty land tax (SDLT). The first question at the time remains the only one people are really interested in: 'what will the rates and bands be?'.

On October 3, 2017, we learned the detail. So will the new rates and bands help or hinder the Welsh property markets?

For residential property, the changes are likely to have an limited impact, at least at the lower end of the market. The maximum saving for someone buying a home worth £150,000-£250,000 is just £500.

The Welsh Government’s published figures anticipate that 69 per cent of transactions in 2018/19 will pay less under LTT than under SDLT. The Land Registry data is less optimistic – based on the year to March 2017, it suggests that 43 per cent of transactions would have paid less tax, and this includes transactions where the buyer would have saved just £1. Or £2. Or £50. Or £100.

The burden of the new rates will fall, of course, on the higher priced transactions but the threshold of £400,000 feels low, even in the context of analysis by Welsh Government that only 6 per cent of transactions in Wales are at prices above this level.

Those buying a home for more than around £445,000 will have an additional complaint – not only will their bill be higher than in England, but it will also be higher than it would have been under the old SDLT slab structure – removed in 2014 to make SDLT more progressive.

Fees for a £500,000 house would be:

• England & Wales (current)– £15,000
• Wales (proposed) – £17,500
• UK pre-2014 – £15,000
• Scotland – £23,350

Overall, however, the new rates for residential are unlikely to have a significant or lasting impact. The biggest impact is likely to be on commercial property. The additional 1 per cent on commercial transactions over £1m is at odds with the Welsh Government’s aims of attracting inward investment and building more homes (the commercial rates also apply to land for residential development).

Although overall tax revenues are projected to be higher under LTT, the Welsh Government acknowledges that it will have a negative impact on commercial property values and transactions.

All else being equal, the LTT would create £12m of additional tax revenue from commercial property. However, the Welsh Government forecasts that the ‘combined transaction and price effect’ (market reaction) to the new top rate will create a drag on the market, reducing revenue by -£7m, resulting in a net increase of only £5m.

Some of the £7m ‘lost’ tax revenue will be the result of price reductions, some will be a result of transactions not taking place. Either way, the impact on the volume of transactions could be significant.

Further information

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