Do you pay LTT on market value when buying a property from your parents in Wales?

Introduction

A common question in family property transfers is whether Land Transaction Tax (LTT) in Wales is calculated on the amount actually paid or on the property’s full market value. This often arises where a child buys a property from their parents using a mortgage, with part of the property’s value being gifted by the parents as equity.

Where the buyer is an individual, LTT is normally calculated by reference to the chargeable consideration actually given for the property. The fact that the buyer and seller are related does not, by itself, mean that LTT must be calculated on market value.

The Question

A buyer is purchasing a residential property in Wales from their parents. The property is worth £480,000. The buyer will pay £380,000, funded by a mortgage, and the parents will gift the remaining £100,000 of value by transferring the property at an undervalue.

The buyer wants to know whether LTT should be calculated on £380,000, being the amount actually paid, or on the full market value of £480,000.

Nick’s Explanation

The relevant distinction is not simply whether the parties are connected. The important questions are:

• whether the buyer is an individual or a company;
• what money or money’s worth is actually being given for the transfer; and
• whether the buyer is assuming responsibility for any existing secured debt.

Section 22 of the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 contains a deemed market value rule, but it only applies where the buyer is a company.

It does not impose a general market value rule merely because an individual is buying property from a parent or another connected person.

Therefore, where the child is buying the property personally and pays £380,000 for it, the chargeable consideration will normally be £380,000, notwithstanding that the property has a market value of £480,000.

The Law

The relevant legislation is the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017.

The principal provisions are as follows:

• Section 18 provides that Schedule 4 determines the chargeable consideration for a land transaction.
• Schedule 4, paragraph 1 provides that chargeable consideration includes money or money’s worth given directly or indirectly by the buyer or a person connected with the buyer.
• Schedule 4, paragraph 8 contains rules for debt. Where property is transferred subject to debt, or the buyer assumes liability for secured debt, the amount of that debt may form part of the chargeable consideration.
• Section 22 contains a deemed market value rule where the buyer is a company and the seller is connected with the company, or where certain share consideration is involved.
• Section 74 applies the connected-person rules in section 1122 of the Corporation Tax Act 2010 where the LTT legislation requires it.
• Schedule 3, paragraph 1 exempts a transaction where there is no chargeable consideration other than rent, subject to the other provisions of the legislation.

The legal position is therefore that a transaction between parents and an individual child is not automatically taxed on market value. The chargeable consideration is normally the amount actually paid or provided, together with any debt or other money’s worth treated as consideration under Schedule 4.

Analysis

Step 1: Identify the buyer.

The buyer is an individual, not a company. Section 22 therefore does not apply.

Step 2: Identify the consideration actually given.

The buyer is paying £380,000 to acquire the property. The fact that this amount is funded through a new mortgage does not alter the amount of consideration. The relevant consideration is the £380,000 paid to the parents.

Step 3: Consider the gifted equity.

The remaining £100,000 represents the difference between the property’s market value and the amount the parents have agreed to accept. That gifted equity is not, in itself, additional consideration given by the buyer.

Step 4: Consider whether any existing debt is being assumed.

If the property is already subject to a mortgage or other secured debt and the buyer assumes responsibility for that debt, the debt rules in Schedule 4 must be considered. Any debt treated as assumed by the buyer may form part of the chargeable consideration.

However, where the buyer simply raises a new mortgage and uses the mortgage advance to pay the agreed purchase price of £380,000, the new mortgage does not increase the consideration above the amount actually paid to the parents.

Step 5: Determine the LTT basis.

• Market value of the property: £480,000
• Amount actually paid to the parents: £380,000
• Gifted equity: £100,000

On the stated facts, and assuming no additional existing mortgage debt or other liability is being assumed, the chargeable consideration for LTT purposes is £380,000.

Outcome

Where an individual buys a property in Wales from their parents for less than market value, LTT is not automatically calculated on the property’s full market value merely because the parties are related.

In the example considered here, the chargeable consideration should ordinarily be £380,000, rather than the £480,000 market value, provided that:

• the buyer is acquiring the property personally and not through a company;
• the actual amount payable to the parents is £380,000; and
• the buyer is not assuming any additional existing mortgage debt or other liability.

Pure Gifts and Debt

A genuine gift of an unencumbered property, with no money or other consideration being given, will ordinarily fall within the exemption in Schedule 3, paragraph 1.

However, a transfer described as a gift may still attract LTT where the property is subject to a mortgage and the recipient assumes liability for some or all of that debt. In that situation, the debt may constitute chargeable consideration under Schedule 4.

Practical Steps

If you are dealing with a similar transaction, the sensible approach is:

1. Confirm whether the buyer is purchasing personally or through a company.
2. Confirm the amount actually being paid to the seller.
3. Check whether the property is subject to an existing mortgage or other secured debt.
4. Establish whether the buyer will assume responsibility for any existing debt.
5. Ensure that the transfer documentation clearly records the agreed consideration and any gifted equity.
6. Ask the conveyancer to calculate LTT by reference to the actual chargeable consideration under Schedule 4.

Conclusion

If an individual buys a property from their parents in Wales for less than its market value, the family relationship does not, by itself, cause LTT to be calculated on market value.

Section 22’s deemed market value rule applies where the buyer is a company. It does not generally apply to a purchase by an individual child from their parents.

On the facts given, the correct chargeable consideration is ordinarily £380,000, not the £480,000 market value, assuming no additional debt or liability is being taken over.

Legal References Used

• Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017, section 18
• Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017, section 22
• Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017, section 74
• Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017, Schedule 3, paragraph 1
• Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017, Schedule 4, paragraphs 1 and 8
• Corporation Tax Act 2010, section 1122

This page was last updated on 16 July 2026.

This page was last updated on 22 March 2026.

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