Commercial and mixed use purchases in Wales pay Land Transaction Tax at 0% on the first £225,000, 1% on the slice to £250,000, 5% to £1,000,000 and 6% above £1,000,000, for effective dates from 22 December 2020. Rent under a new commercial lease is taxed on its net present value at 0% to £225,000, 1% to £2,000,000 and 2% above. Compared with SDLT, Wales is cheaper on any commercial purchase up to £1,175,000 and dearer above it, because SDLT has no 6% band.
What counts as non residential property in Wales?
The Welsh Revenue Authority (WRA) describes non residential property as any property that is not residential: shops, offices, working farmland and bare ground, together with anything likely to have been commercially exploited by machinery or used for business. A mixed property has both elements, for example a building with a shop and a flat, a house with a doctor’s surgery, or a working farm. Mixed use purchases pay the non residential rates on the whole price.
The statutory definition is section 72 of the Land Transaction Tax and Anti avoidance of Devolved Taxes (Wales) Act 2017 (LTTA). Under section 72(5), a building used as a children’s home, a hall of residence for students in further or higher education, a care home, a hospital or hospice, a prison, or a hotel or similar establishment is not used as a dwelling. Section 72(4) goes the other way for accommodation for school pupils, other student accommodation and armed forces accommodation, which count as dwellings. Section 72(9) treats six or more dwellings bought in a single transaction as non residential.
Where the line is unclear
The WRA says a transaction is likely to be residential if the property forms part of the garden or grounds of a dwelling, or is for its benefit, such as a cottage with paddocks or stables for personal use. It names derelict buildings, bed and breakfasts, guest houses, holiday lets and student accommodation as cases that need checking against its guidance. The tests for whether ground is non residential are applied to the seller’s use, up to and including the effective date. A buyer who plans to farm a paddock commercially cannot use the non residential rates on that basis alone.
How are the bands applied?
| Slice of the price | Rate from 22 December 2020 |
|---|---|
| Up to £225,000 | 0% |
| £225,001 to £250,000 | 1% |
| £250,001 to £1,000,000 | 5% |
| Above £1,000,000 | 6% |
The same table applies to a lease premium. Before 22 December 2020 the nil band stopped at £150,000, with the other bands unchanged. Section 27 LTTA sets the slice method, and the WRA’s calculation guidance at LTTA/3020 shows it working.
Illustration only. A company buys a workshop for £300,000. The tax is 0% on £225,000, 1% on £25,000 (£250) and 5% on £50,000 (£2,500), a total of £2,750. On a £3,500,000 premium for an assigned lease the WRA’s own example gives £250, plus £37,500 on the 5% band, plus £150,000 at 6% on the £2,500,000 above £1,000,000, a total of £187,750.
How does LTT compare with SDLT and LBTT?
SDLT on non residential property uses 0% to £150,000, 2% to £250,000 and 5% above, with no higher band. Scotland’s LBTT uses 0% to £150,000, 1% to £250,000 and 5% above. Applying each published table to the same price:
| Price | LTT (Wales) | SDLT (England) | LBTT (Scotland) |
|---|---|---|---|
| £300,000 | £2,750 | £4,500 | £3,500 |
| £500,000 | £12,750 | £14,500 | £13,500 |
| £1,000,000 | £37,750 | £39,500 | £38,500 |
| £1,175,000 | £48,250 | £48,250 | £47,250 |
| £2,000,000 | £97,750 | £89,500 | £88,500 |
| £5,000,000 | £277,750 | £239,500 | £238,500 |
Up to £1,000,000 the Welsh nil band saves £1,750 against SDLT. Above that, each extra pound costs 1% more in Wales, so the saving is used up at £1,175,000. On larger investment purchases the Welsh charge is the highest of the three. The English and Scottish sides are covered in SDLT on commercial property purchases and LBTT on commercial property.
How are commercial leases taxed?
When a new non residential lease is granted, the rent is taxed on its net present value (NPV) and any premium is taxed separately at the purchase rates above. The two figures are then added together.
| NPV of rent | LTT rate | SDLT comparison |
|---|---|---|
| Up to £225,000 | 0% | 0% to £150,000 |
| £225,001 to £2,000,000 | 1% | 1% from £150,001 to £5,000,000 |
| Above £2,000,000 | 2% | 2% above £5,000,000 |
Illustration only. A lease with rent of NPV £500,000 costs 1% of £275,000, which is £2,750, in Wales and 1% of £350,000, which is £3,500, under SDLT. At an NPV of £3,000,000 the position reverses: £17,750 plus £20,000 at 2%, a total of £37,750, against £28,500 under SDLT.
The relevant rent rule
Schedule 6 paragraph 34 LTTA removes the 0% band from a lease premium where the relevant rent is at least a specified amount. The WRA states the threshold as £13,500 a year for transactions completed on or after 4 February 2021 (£9,000 before then). Any part of the premium that would have fallen in the 0% band is taxed in the next band instead. The 0% band for the rent itself is unaffected. Where one lease covers a shop and a flat, the rent is apportioned on a just and reasonable basis to decide whether the non residential share reaches £13,500.
Illustration only. A ten year shop lease has a premium of £200,000 and rent of £20,000 a year. Without the rule the premium would fall wholly in the 0% band. Because the rent exceeds £13,500, the premium is taxed at 1%, giving £2,000.
Does VAT on the price increase the LTT?
Yes. Schedule 4 paragraph 2 LTTA includes VAT chargeable on the transaction in the chargeable consideration, except VAT arising from an option to tax made after the effective date.
Illustration only. A building is sold for £600,000 plus VAT at 20%, so £720,000. LTT on £600,000 would be £250 plus 5% of £350,000, which is £17,750. On £720,000 it is £250 plus 5% of £470,000, which is £23,750. The VAT adds £6,000 of LTT.
When are the return and payment due?
The return and payment are due within 30 days from the day after the effective date, which is usually completion. The WRA asks for BACS payments to be sent four working days before the due date. A purchase other than a lease is not notifiable where the chargeable consideration, including linked transactions, is less than £40,000. Because the non residential nil band is £225,000, many returns will show no tax but still have to be filed. The wider rules are in LTT (Wales) explained, and residential surcharges in LTT higher residential rates.
What mistakes come up most often?
- Using SDLT figures for a Welsh property, or forgetting the 6% band above £1,000,000.
- Missing the relevant rent rule on a lease with both a premium and rent of £13,500 or more.
- Applying the old £150,000 nil band to a current transaction.
- Treating paddocks or gardens as non residential based on the buyer’s plans.
- Leaving VAT out of the price.
- Assuming six dwellings bought in two transactions get the treatment that six in one transaction would.
If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.
Related Accountapedia entries
- SDLT, LBTT and LTT compared
- LBTT (Scotland) explained
- Stamp duty (SDLT) explained
- Reliefs from LTT in Wales
- LBTT on non residential leases
Sources
- Welsh Government: Land transaction tax rates and bands
- Welsh Government: Land transaction tax non residential mixed use property guide
- legislation.gov.uk: Act of the Senedd 2017 c. 1, section 72
- Welsh Government: Calculation land transaction tax payable technical guidance
- legislation.gov.uk: Act of the Senedd 2017 c. 1, schedule 6
- Welsh Government: Land transaction tax leases technical guidance
- legislation.gov.uk: Act of the Senedd 2017 c. 1, schedule 4
- GOV.UK: Vat rates
- Welsh Government: Pay land transaction tax
- Welsh Government: Land transaction tax returns and payments technical guidance
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.