Those planning to buy a holiday home in Wales could end up paying a higher rate of Land Transaction Tax under proposals being considered by ministers.

A consultation has been launched on hiking the Welsh version of stamp duty on property sales involving planned second homes or short-term holiday lets.

But while such changes could be implemented Wales-wide, the study – based on a report by Dr Simon Brooks – will also consider introducing hikes only in areas where second homes are considered a major issue.

Those looking to buy such properties in Wales already have to pay a minimum of 4 per cent duty on top of that payable for their band.

This higher LTT rate is activated when a house is sold to someone already owning another property, which in addition to holiday homes can also include those buying houses to rent them out and also someone still trying to sell their original home.

While 4 per cent is payable on properties sold for up to 180,000, the rate rises to 7.5 per cent on sales of between £180,000 and £250,000 and on a sliding scale of up to 16 per cent on dwellings changing hands for £1.5m or more.

”LTT is an episodic tax, only chargeable at the point of purchase, it is, therefore, likely to have a limited impact in the short to medium term on the existing proportion of short-term holiday lets or second homes in a community,” note the consultation documents.

“However, it might help to reduce the number of future purchases and over the longer term it may be helpful as part of a wider suite of responses to address issues associated with second homes.”

During 2020/21 in Gwynedd, where 1,920 residential property transactions were recorded, 720 resulted in the buyers paying the higher tax rate, but in Dwyfor Meirionnydd the figure was 44 per cent.

590 Gwynedd sales were individual purchases for someone not planning to use it as a main residence (30.7 per cent of all property sales), as opposed to still trying to sell their previous home or being bought by a company.

Earlier this year Welsh Government launched a consultation over what’s often referred to as a “loophole”, allowing owners of second properties to flip from domestic to non-domestic rates, but making use of Small Businesses Rates Relief to avoid making any contribution at all into local authority coffers.

Housing minister Julie James said all second home owners should be making a “fair contribution to the communities in which they buy property” and suggested more stringent checks and potential changes to local taxes.

Gwynedd Council leader, Cllr Dyfrig Siencyn, said increasing LTT should be only one tool, reiterating calls to close the non-domestic rates “loophole” for self-catering accommodation available for up to 140 days in a year and actually let for at least 70.

“Land Transaction Tax is one tool that could be used to try to grasp some control on second homes,” he added.

“But that is just one, one off payment.

“In my view amending Section 66 of the Local Government Finance Act would be more effective as each dwelling would pay council tax plus any premium on an annual basis.”

MS Mabon ap Gwynfor said the 4 per cent hike “has not gone far enough”.

“In Gwynedd the numbers show second homes are causing house prices to continue to increase and we’ve consistently called for the LTT to be tripled on the purchase of second homes.

“Whilst a distinction needs to be drawn between locally owned holiday lets that provide for the local tourist economy, the proliferation of second home ownership to be used for a few weeks a year by people who reside elsewhere the majority of the time is bad for our communities, bad for tourism and bad for our economy.

“Land Transaction Tax has a key role to play, as part of a wider package of measures, to tackle the injustice of second home ownership and its contribution to the wider housing crisis facing our communities.

“Just this week I spoke to the Conservative-run government of Ontario where they have a similar non-residential speculation tax of 15% on property sales for non-citizens, this is a model that Wales could look at.”

Urging people to take part in the consultation, he said: “It is vital to the future of our communities that we stop the blight of the unfettered proliferation of second homes and we reverse it so that these properties provide much needed local homes for local people.”

Welsh Conservatives have opposed the existing higher levels of LTT, claiming it “penalises small and medium businesses”.

Speaking in the Senedd, North Wales MS Mark Isherwood said they’re already higher than the equivalent ‘Stamp Duty Land Tax’ Higher Rates in England for all purchases above £180,000.

He added: “The Welsh Government should stop blaming the affordable housing shortage in holiday home hotspots on legitimate local businesses and second home ownership, and start taking responsibility for causing the social and affordable housing supply crisis in Wales from devolution in 1999, despite repeated warnings.”

The consultation closes on 28 March. It can be found at gov.wales/second-homes-local-variation-to-land-transaction-tax-rates-html#section-87479