by Luke Edwards
If you are thinking of buying a property with the intention of holiday letting then there a number of financial considerations you need take into consideration. Stamp duty for second homes is one of those things that can catch buyers unaware, so its important you have all the facts and figures before going ahead.
One of these is Stamp Duty (Land Transaction Tax) – in Wales. According to the Welsh Government “You must pay LTT if you buy a property or land over a certain price in Wales. The current LTT threshold is £250,000 for residential properties purchased at the main rates and £225,000 for non-residential land and properties”.
You are taxed on the part of the property that falls into each Stamp Duty threshold (pictured below).
For example, if you buy a property in Wales for residential use only for £470,000
You will pay 0% on anything up to £250,000, you will then pay 5% on the next £150,000 and 7.5% on the final £70,000.
That equals £0 (0% of £150,000) + £7,500 (5% of £150,000) +£5,250 (7.5% of £70,000) = £12,750
There are also some helpful calculators online that can calculate this for you depending on the reason for purchasing
Shown below is the price bands for stamp duty in Wales.
If purchasing a second home with the intent of letting such as holiday letting, there is an additional premium charge
The additional premium for properties in Wales is 4% of the overall property price.
So for the example we gave above
You also need to pay an additional 4% on top of the value of the property
So £12,750 (standard charge) + (4% of £470,00) £18,800 = £31,550
If you’re buying an additional residential property, you’ll probably have to pay the higher rates of Stamp Duty.
These are the rules that apply:
It doesn’t apply:
There are some cases where you could be exempt from the higher rates of Stamp Duty as well as any stamp duty at all.
According to HMRC these include:
For the additional premium rate, these include:
For more advice on exemptions we advise speaking to a qualified financial advisor.
The good news is if you are considering purchasing a holiday let, there are many tax advantages and benefits you may be eligible for which will help offset some of your losses.
Read about the tax advantages of holiday letting in our Furnished Holiday Lettings Tax Guide.
* At the time of publishing (29 January 2021), Menai Holiday Cottages has taken all reasonable care to ensure that the information contained in this article is accurate. However, no warranty or representation is given that the information is complete or free from errors or inaccuracies. Generic information is contained within this article and each individual’s financial affairs are different, further advice should be sought from a financial advisor.
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