Devolved Welsh stamp duty could hit prime homes

Estate agents fear prime property purchases could be targeted by the first Welsh tax in over 800 years.

Concerns have been raised that the Welsh government may adopt a more progressive model of property taxation, along the lines of Scotland's new tax, when powers are devolved to Cardiff in 2018.

A consultation on land transaction tax, which will replace stamp duty in Wales, concluded this week, but rates and bands will not be decided until well after Welsh assembly elections next year.

Mark Hayward, managing director of the National Association of Estate Agents, said his members were worried that purchases at the middle-to-upper end of the market could face higher levies when Cardiff assumes control of property taxes.

"If a heavy tax [on expensive properties] is introduced in Wales, many people living close to the English border could well relocate," he said.

Nigel Jones, director at John Francis, an estate agency in south Wales, said his first priority was for last year's stamp duty changes to not be reversed.

The replacement of the so-called "slab" structure of tax bands with an incremental scale, rising with the value of a home purchase, had removed anomalies in the house market such as the "stagnant area" between £250,000 and £275,000, he said.

Stamp duty collected in Wales totalled only £145m in 2013-14, although the Office for Budget Responsibility recently forecast that this would rise to £231m by 2018-19 - the year when control of the tax will be devolved.

Although average house prices in Wales - at £170,000, according to the latest Office of National Statistics figures - are much lower than the UK average of £267,000, Mr Haywood said there has been no proposal to lower the threshold at which tax becomes payable. This lower limit currently stands at £125,000.

"The Welsh government is very keen to set the level at a point where as few people pay it as possible," said Mr Haywood.

Additional powers for Cardiff were proposed by the Conservative-led government earlier this year. Combined with the devolution of stamp duty, landfill tax and business rates, the Welsh assembly would be responsible for raising roughly one-fifth of its budget.

Plaid Cymru, the nationalist opposition party, wants Wales to have the same taxation powers as Scotland, which is set to gain control of its income tax and bands following last year's independence referendum.

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