By Debbie James

The introduction of the new Wales-only land transaction tax (LTT) could result in Welsh farmers paying thousands of pounds more in tax on major land purchases.

The Welsh replacement for stamp duty land tax (SDLT) – which applies from April 1, 2018 – introduces changes to rates of tax payable for residential and non-residential property.

The biggest change of relevance to farmers is a rise in the tax rate for any non-residential property that sells for more than £1m.

Under current SDLT arrangements, the tax charge for land selling for more than £250,000 is 5 per cent, but in Wales the charge will be 5 per cent from £250,000 to £1m and then rise to 6 per cent on anything over the £1m threshold.

However, the purchaser of any non-residential property worth between £150,000 and £250,000 – which could include smaller land parcels – will benefit from a reduction in the tax rate from 2 per cent to 1 per cent.

The Central Association of Agricultural Valuers (CAAV) is warning that the Welsh replacement for stamp duty land tax (SDLT) could see farm buyers facing higher tax bills.

CAAV secretary Jeremy Moody said it would mean that the freehold sale of a farm in Wales, valued at £2m, would result in an LTT charge of £98,440 from April 2018, compared with £89,450 under SDLT.

“Where land sells at £8,000/acre, any sale of more than 125 acres will attract more tax under LTT than it would under SDLT.

“A farm at £4m would see a Welsh LTT bill of £218,440 compared with £189,450 under SDLT.”

Higher-value tenancies could also be affected, with non-residential and mixed properties subject to a 2 per cent tax from £2m in Wales, lower than the £5m threshold under SDLT, though that may affect few Welsh farm business tenancies, said Mr Moody.