Understanding the Impact of Wales' 2025-26 Budget on Residential Land Transactions

The Welsh Government's 2025-26 Budget introduces notable changes to Land Transaction Tax (LTT), which will affect property transactions, particularly for those purchasing second homes, buy-to-let properties, or buying through corporate entities. Here’s an overview of the key updates and their implications.

1% Increase in Higher Residential Rates

Starting 11 December 2024, higher LTT rates for residential property purchases will rise by 1 percentage point across all price bands.

For example:

• The rate on the first ￡180,000 of a property’s value will rise from 4% to 5%.
• For the next ￡70,000, the rate increases from 7.5% to 8.5%.
• Properties valued above ￡1.5 million will see the top rate increase from 16% to 17%.

These changes apply to transactions where the buyer already owns a residential property or is a non-individual (e.g., a company).

Changes to Multiple Dwellings Relief (MDR)

From 2025, the Welsh Government will reform MDR to disallow claims where the subsidiary dwelling exemption is applied. This follows consultations earlier this year on potentially abolishing MDR altogether. While the relief remains for now, the government’s monitoring efforts suggest further changes could be on the horizon.

Other Budget Announcements

In addition to LTT, the Budget includes other tax-related updates:

• Income Tax: No changes to the Welsh rates for 2025-26.
• Landfill Disposal Tax (LDT): The standard rate rises to ￡126 per tonne, aligning with the UK’s landfill tax.
• Non-Domestic Rates: The multiplier will be capped at 1%, and retail, leisure, and hospitality businesses will continue receiving 40% relief on their rates.

What Does This Mean for Property Buyers?

The increase in LTT rates, combined with the adjustments to MDR, signals a stronger focus on taxing high-value and multiple-property transactions. Buyers and investors should carefully assess how these changes might affect their budgets and returns. Seeking advice from tax professionals or property consultants could help navigate the new landscape effectively.

Stay tuned for further updates and insights as the Welsh Government continues to refine its tax policies in the coming year.