We now to item 15, the Land Transaction Tax (Temporary Variation of Rates and Bands for Residential Property Transactions) (Wales) (Amendment) Regulations 2021, and I call on the Minister for Finance to move the motion—Rebecca Evans.

Motion NDM7656 Rebecca Evans

To propose that the Senedd, in accordance with Standing Order 27.5:

1. Approves The Land Transaction Tax (Temporary Variation of Rates and Bands for Residential Property Transactions) (Wales) (Amendment) Regulations 2021 laid in the Table Office on 4 March 2021.

Motion moved.

Thank you. I'm pleased to open the debate on the Land Transaction Tax (Temporary Variation of Rates and Bands for Residential Property Transactions) (Wales) (Amendment) Regulations 2021. I thank the Legislation, Justice and Constitution Committee and the Finance Committee for their reports.

Last July, I made regulations to introduce a temporary tax reduction period for LTT. The Senedd approved the making of those regulations in September. The purpose of the latest regulations is to extend the temporary tax reduction period from the original expiry date of 31 March to 30 June. I have listened to the concerns of homebuyers across Wales and housing market professionals about delays that may be impacting on some of the people who might reasonably have expected to be able to complete their transactions by 31 March. This extension to the temporary tax reduction period is to provide those taxpayers with additional time to complete their purchases.

Buyers entering transactions now should plan for the possibility that they may have LTT to pay or have an increase to their tax liability. It is a simple and clear rule: if you complete on or before 30 June, the reduction period will apply; if you complete afterwards, than the standard rates will apply. Importantly, our temporary tax reduction period, unlike in the rest of UK, applies only to those paying the main residential rates. There are no tax reductions for investors in buy-to-let properties, furnished holiday lets or second homes. This ensures that the benefits of this temporary variation are provided broadly to those purchasing homes in which to live. 

The extension to the temporary tax reduction period, whilst it will continue to provide an economic stimulus and continue to support the economy in Wales, is primarily directed to help homebuyers who have encountered delays in the homebuying process in the run-up to 31 March. Most should manage to complete by the new deadline.

The extension to the temporary tax-reduction period is a balanced and simple response by this Government. The extension is fair to those homebuyers who have been unable to complete their purchases, and simple, by continuing to operate by reference to a clear deadline. I therefore ask for the Senedd's support to confirm the extension to the temporary LTT rates.

As we heard, these regulations specify an extension to the current temporary variation to the land transaction tax and LTT rates and bands that will apply to purchases and certain residential property transactions, commencing on 1 April and ending on 30 June 2021, with the rates and bands reverting back to those in force prior to 27 July 2020 after that date. We, of course, support this extension, although we regret that the ceiling on the zero-rate band is remaining at £250,000. 

Following the announcement by the UK Chancellor that the current stamp duty holiday in England, with a nil-rate band up to £500,000, was being extended until the end of June, and that the nil-rate band will then be £250,000 until the end of September to smooth the transition, returning to the normal rate there from 1 October, the Welsh Government announced that it was temporarily extending the equivalent LTT temporary tax reduction period in Wales until 30 June but still keeping the ceiling on the nil-rate band at £250,000.

In England, the nil rate for first-time buyers from 1 July will still be up to £300,000, whereas, from 1 July in Wales, the nil-rate band will only go up to £180,000, then rising to 3.5 per cent up to £250,000 and 5 per cent over £250,000. Well, as someone who grew up in north Wales told me, they're buying a new build in Wrexham for £280,000, but this will add an additional cost of £3,950 to their purchase and they're therefore considering finding something in England instead. And although the ceiling on the nil-rate band in England will fall to £125,000 from 1 October, first-time buyers there will then still pay nothing on purchases up to £300,000, unlike in Wales. Whereas this Welsh Government talks about average first-time buyer purchase prices in Wales, these do not apply to large chunks of the population of Wales, particularly in populous cross-border regions. We cannot therefore support these regulations and will abstain accordingly. 

I thank the Minister for her statement. We regret that these lower rates of LTT can't carry over until 30 September, because, if they were to, we would have a three-month period where we had a threshold of up to £250,000 that was, again, the same in England and Wales, which of course we would wish to have. However, I would like to thank the Minister for doing the extension at all, because I had in my postbag a number of concerns to a greater, or sometimes a very great, degree that they feared missing out on the 30 March because of solicitors or otherwise not being able to get through transactions as they expected. I saw today from the HMRC data for February, which I assume just relates to the SDLT for England and Northern Ireland, that there was about a 50 per cent year-on-year increase. So, I hope the Minister is getting in a good amount of land transaction tax revenue from people who are rushing to meet the deadline and perhaps now more still having extended it. So, while I regret that it's not being extended further to match the UK rate for England and Northern Ireland over that third quarter of the calendar year period, I nonetheless thank her for making the extension that she has, which, for a lot of individuals who feared missing out through no fault of their own, was well received. Thank you.

The Minister to reply.

Thank you for the contributions to the debate this afternoon, and the decision that I've taken here in Wales is very much appropriate to the housing market, because the temporary zero rate band is now around £66,000 higher than the average cost of a home here in Wales, which is £184,000. And it's also £70,000 higher than the normal starting threshold, which, of course, is £180,000. And as I said in my introductory remarks, the primary purpose of extending is to provide that additional time for those people who are unable to complete by 31 March, but it is the case that the housing market in Wales has been remarkably resilient even in the last 12 months, and the residential transaction data published by the Welsh Revenue Authority shows that transaction levels in the months from October to January have returned to around pre-pandemic levels. So, the housing market is proving to be surprisingly resilient, I think, here in Wales.

There are some questions that have been raised as to why we didn't decide to take the same approach as the UK Government in terms of the policy, and we have deliberately chosen a different approach, which is appropriate to our own housing market here in Wales. Because, of course, providing the same policy as they have across the border would have removed tax, or provided very, very large tax reductions, for some of the most expensive residential properties that we have in Wales, given that the average prices that we have are very different. And of course, the policy in England was very much designed to respond to house prices in London and the south-east. And of course, we took a different decision, and our decision meant that we haven't provided those tax reductions for the buyers of second homes or buy-to-let properties, so we've had a much more targeted and measured policy here in Wales, which also meant, of course, that we were able to invest additional money in the social housing market, meaning that our approach very much was more progressive as well.

I don't really consider that there is any merit in that kind of stepped approach that the UK Government has taken in terms of its withdrawal from the latest changes, because, across the border, the SDLT holiday provided a tax reduction of up to 3 per cent on the cost of a property, and a maximum saving there would have been £15,000, again reflecting the different housing market across the border, but the LTT tax reduction period up to a maximum of 1 per cent means a maximum saving of £2,450, so, again, reflecting the different house prices and the picture that we have here in Wales. But, when we do return to the normal starting threshold for LTT, and the other two UK property transaction taxes return to their normal levels, it will mean that Wales remains the only country in the UK with a starting threshold for paying tax that is around the average house price, and, of course, in England, the normal starting threshold is £125,000, which is around half of the average price across the border. So, even when we return to the normal prices—or the normal rates, I should say—then we will still have the most progressive system. And of course, our reduction is for all purchasers of homes, rather than just offering that to first-time buyers, as I understand is the intention of the Conservative Party, should they find themselves in a position in Wales to restrict their support only to first-time buyers, rather than all housebuyers.

The proposal is to agree the motion. Does any Member object? Yes, there is an objection, and therefore I will defer voting under this item until voting time.

Voting deferred until voting time.