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Tax Hike - agents warn against more taxes on second homes

Propertymark is urging restraint on the part of the Welsh Government as it moves to tackle what it sees as the disadvantages of second home ownership.

Earlier this month the Welsh Government opened the door to possible local changes to the current Land and Transaction Tax - Wales’ equivalent of stamp duty. This would, in theory, allow councils the right to increase LTT applied to second homes. 

The Welsh Government also increased the maximum level at which local authorities can set council tax premiums on second homes and long-term empty properties to 300 per cent, effective from April 2023.

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Councils will be able to set the premium at any level up to the maximum, and they will be able to apply different premiums to second homes and long-term empty dwellings. The Welsh Government is urging councils to use revenue raised from the premiums to improve the supply of affordable housing.

In a parallel move, the criteria for self-catering accommodation in Wales being liable for business rates instead of council tax will also change from next April.

Currently, properties that are available to let for at least 140 days, and that are actually let for at least 70 days, will pay rates rather than council tax. The change will increase these thresholds to being available to let for at least 252 days and actually let for at least 182 days in any 12-month period.

Propertymark has voiced its concern at the LTT proposal. 

It argues that any link between second homeownership and house price inflation has not been sufficiently understood to warrant sweeping changes to the LTT regime, and suggests that there are alternative tools at the Welsh Government’s and local authorities’ disposal – including council tax premiums and regulation and licensing of short-term lets – to tackle any localised issues arising from a high proportion of such property.

The agents’ trade body says the temporary relief on LTT applied during the pandemic illustrated the sensitivity of purchasers to a reduction in LTT and the organisation says: “We have concerns that the frequency of variation as well as the variation itself could cause property markets to be disrupted and become less stable.  

“Furthermore, we have some doubts that enforcement, particularly around the policing of intended and actual use of property, is feasible. 

“Whilst acknowledging the Welsh Government’s related proposals to amend planning policy for second home and short-term holiday let use, we do not consider local authorities to be sufficiently resourced to undertake the necessary monitoring to ensure the policy is implemented effectively.”

As a result Propertymark wants the Welsh Government to quantify the potential loss of revenue arising from the proposal, alongside the impact this will have on Welsh Government spending and the viability of the functions and services it funds. 

“Higher rate LTT has historically accounted for approximately 40 per cent of total LTT revenue and amounted to £66m in 2020-21. Any reduction in revenue could have considerable consequences for the Welsh economy and these costs must be fully analysed before any changes are implemented” says a Propertymark statement.

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