1% hike in second home sales tax described as “very small step in the right direction”

A plan to increase tax on sales of second homes have been described as a “very small step in the right direction” – but one that remains “entirely inadequate.”

Monday’s Welsh Government budget announcement will see people buying second homes or buy-to-let properties in Wales having to pay an extra 1% in Land Transaction Tax (LTT) on top of that usually payable for their band.
The tax rise – the Welsh version of stamp duty – will come into effect from today.

It means that a 4% (formerly a 3%) levy will now apply when buying affected properties up to the value of £180,000.

But that figure would rise to as much as 16% for sales of £1.6m or above.

Councils across the north west Wales have lobbied ministers for stricter measures to discourage properties being snapped up as second homes and buy-to-let properties amid claims that the boom is leading to a “housing crisis,” amid fears locals now being priced out of many areas.

According to the Welsh Government, money generated from this “moderate” increase will be ploughed back into affordable and social housing projects, providing 3,500 additional new homes and supporting jobs.
Arfon MS Sian Gwenllian, who has long called for councils to be given more powers in the field, described the move as a “very small step in the right direction” but also “entirely inadequate.”

“The situation is a crisis, and Plaid Cymru is calling on the Government to double it,” she added.
“The Government has recognized that they have the ability to do something real, and have refused to be brave in their approach.”

Housing Minister Julie James confirmed last week that she plans to make a statement to the Senedd in January outlining how the Government intends to act on the issue of housing in rural and tourist areas.

A recent council-commissioned report showed that 10.77% of home in Gwynedd are now either classed as second homes or holiday accommodation.

Gwynedd Council leader Dyfrig Siencyn claimed that ministers were “taking with one hand whilst giving with the other,” referencing a current “loophole” which allows second home owners registering their properties as businesses to avoid paying a 50% holiday home premium as well as any council tax.
He added: “We welcome the government’s announcement and we will look at the detail of the plans.
“It does beg the question though, if the Welsh Government is so eager to take this step to help manage the second home market, why do they remain so reluctant to prevent second homeowners and holiday let owners from moving their properties from the Council Tax rate to the Business Tax Rate (if let out for enough days in a calendar year).

“This is something that needs be put right as a matter of urgency.
“The fact is that by doing nothing regarding this matter, Welsh taxpayers are losing out on many millions of pounds that could be put to good use to pay for public services in Wales.”

In order to have their property rated as a ‘self-catering unit’ and valued for business rates, second home owners in Wales must make their property available to let for 140 days or more per year and actually let it for a minimum of 70 days.

Anglesey Council’s finance portfolio holder Robin Williams said that more needed to be done.
“This is a small but welcome step most certainly, but we need more than just adjusting the land transaction tax but also to shut the loophole and stop people from switching from paying domestic to non-domestic rates,” he said.
“We have written to the Welsh Government several times only to be told there was no problem so unless there is a change of heart between now and January we may well end up in the exact same situation.”

By Gareth Williams – Local Democracy Reporter