LTT on annuities: how periodic payments are valued
LTT and annuities
For qualifying long-term annuities and periodic payments, LTT uses a value of up to 12 annual payments. Inflation-only increases are ignored, but other variable payments use the 12 highest years.
- Tax on the annuity cannot be deferred.
- Other separate uncertain payments may be considered separately.
- The return deadline is normally 30 days after the effective date where the deal is notifiable.
Scroll down for the full analysis.
Read the original guidance here:
LTT on annuities: how periodic payments are valued
If part of your property deal is paid through regular payments, Land Transaction Tax may treat them as a single amount up front. This is Wales’s version of stamp duty. For some long-term annuities, LTT uses the value of 12 years of payments rather than the amount payable across the full life of the arrangement when calculating tax. That is the rule.
What this rule is about
Most property deals have one price. Some do not. Instead, you may agree to pay the seller a regular yearly sum, perhaps for their lifetime or for an open-ended period.
LTT requires a value when the deal takes place. It cannot wait for years to discover every payment that will actually be made. The law therefore sets out a method for valuing certain long-running payments.
This may affect the LTT figure shown on the return. It may also affect when tax must be paid.
What the official source says
The official Welsh guidance explains the rule in section 21. Where an annuity is payable for life, forever, for an unknown period, or for more than 12 years, the amount used for LTT is limited to 12 annual payments.
- If the annual amount is fixed, use 12 years of that payment.
- If it can change from year to year, use the 12 highest annual payments.
- A rise linked only to RPI, CPI, CPIH or a similar inflation index does not count as a changing payment for this purpose.
- If an amount depends on a future event, assume the payment will be due.
- If an amount is not yet known, use a reasonable estimate.
- The rule may also apply to periodic payments that are not rent, although the agreement does not describe them as an annuity.
The guidance is the Welsh Revenue Authority’s explanation. Section 21 of the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 is the law that decides the point.
What this means in practice
You do not simply add every future payment for the rest of a person’s life, or for an unlimited period. For a payment within this rule, start with a figure capped at 12 annual payments.
That cap does not mean you can postpone tax on the annuity. The law specifically excludes an annuity from the deferral system for uncertain payments.
- Work out the LTT value of the annuity at the start.
- Include that value in the first LTT return where the transaction must be reported.
- File the return within 30 days beginning with the day after the effective date.
- Pay any LTT due by that filing date.
- Do not include the annuity in a request to defer tax.
- Keep separate records for any other uncertain payment in the deal.
A deal can contain both types of payment. In that case, a request to defer tax may still be possible for a separate payment that is uncertain or contingent. It cannot cover the annuity part.
How to analyse it
Begin with the agreement itself, rather than the label used by the buyer or seller. Labels do not decide it. What matters is what must be paid, when, and for how long.
- List every cash payment and every promised future payment.
- Identify payments made regularly rather than as one lump sum.
- Determine whether each regular payment continues for life, forever, for an unknown period, or for more than 12 years.
- Divide payments into successive 12-month periods from the effective date.
- Check whether the annual amount can vary.
- Ignore a change that only tracks a recognised inflation index.
- For other changes, identify the 12 highest annual amounts.
- Check whether any amount depends on a future event or needs a reasonable estimate.
- Separate the annuity from any other uncertain payment before considering deferral.
What actually decides the answer? The payment clauses. A headline such as “price payable over time” is not enough.
Example
Priya buys land, agreeing to pay the seller £10,000 each year for 15 years. The payment is an annuity within the long-term rule. The amount used for LTT is £120,000: 12 annual payments of £10,000. This example only shows the valuation rule. The LTT due depends on the tax rates and bands in force for the transaction.
Now change one fact. The agreement says the £10,000 rises each year only in line with CPI. That inflation link does not make the payment variable for this rule. It is still treated as £10,000 per year when applying the 12-year calculation.
Why this can be difficult in practice
The hard part is often not the arithmetic. It is deciding what the agreement really creates. A payment described as a share of future income, for example, may have an uncertain amount and may also be paid periodically.
You might think a later fall in payments lets you reopen the annuity calculation. It does not. The usual later-return and repayment rules for a contingency ending or an amount becoming known do not apply to an annuity within section 21.
- A payment may be called an instalment but operate as a long-term periodic payment.
- A payment linked to inflation is treated differently from one linked to profit or turnover.
- The highest 12 annual payments matter where the amount can vary for reasons other than inflation.
- A mixed deal needs a clear split between the annuity and other future payments.
- The effective date matters because it starts the successive 12-month periods and the filing clock.
Key takeaways
- Long-term annuities are generally valued using 12 annual payments for LTT.
- Use the 12 highest years where payments vary, but ignore inflation-only increases.
- You cannot defer LTT on an annuity, even where other uncertain payments may qualify for deferral.
Technical analysis
For advisers, and for anyone who wants to check the law behind this page. You do not need this section to understand the guidance above.
Legislation
- LTTA 2017 section 19 — valuing payments dependent on a future event
- LTTA 2017 section 20 — estimating uncertain or unknown payment amounts
- LTTA 2017 section 21 — valuing annuities and other periodic payments
- LTTA 2017 section 44 — filing an LTT return within 30 days
- LTTA 2017 section 45 — when a land transaction must be reported
- LTTA 2017 section 47 — later returns when contingent payments change
- LTTA 2017 section 48 — repayments after contingent payments are reduced
- LTTA 2017 section 57 — paying LTT by the return filing date
- LTTA 2017 section 58 — requests to defer tax on uncertain payments
- LTTA 2017 section 59 — excluding annuities from deferred tax calculations
Official guidance
The pages below are the Welsh Revenue Authority’s guidance. Guidance is not law. It sets out how the Welsh Revenue Authority reads the legislation, and it is not binding on you, on a tribunal or on a court. Where guidance and the legislation differ, the legislation wins. the Welsh Revenue Authority can also change or withdraw guidance, and it may not cover your facts.
- Welsh Revenue Authority, Chargeable consideration technical guidance, LTTA/2450 Annuities (official guidance, not law)
Where this is not settled
- The supplied statutory library contains no currency notice. The legislation in force on the effective date of the transaction should be checked before relying on this page.
- Whether a payment is an annuity or another periodic payment can depend on the wording and commercial effect of the agreement.
- A payment may be contingent, uncertain or both in everyday language. The statutory definitions and the facts decide how it is valued.
Evidence you would need
This kind of case is decided on the facts of the individual property. These are the records that usually settle it, and the ones an adviser would ask you for.
- The contract, transfer document and any side agreement setting out each payment.
- A schedule showing payment dates, amounts, duration and any maximum amount.
- The clause explaining any link to RPI, CPI, CPIH or another inflation index.
- Evidence of the event or calculation on which any uncertain payment depends.
- A clear split between annuity payments and any separate contingent or uncertain payments.
Explore this with an AI
Readers often want to test their own situation. Copy the prompt below into ChatGPT, Claude or Gemini. It hands the model the actual legislation for this page rather than letting it answer from memory, and tells it to be explicit about what is uncertain. What comes back is information, not advice – check it against the links above.
I am researching Land Transaction Tax (LTT), the tax on property in Wales. It replaced Stamp Duty Land Tax in Wales on 1 April 2018, and SDLT does not apply in Wales. MY QUESTION LTT on annuities: how periodic payments are valued [Replace this with your own situation: what you are buying, the price, the dates, who the buyer is, and what you plan to do with the property.] THE LAW THIS TURNS ON - LTTA 2017 section 19 - valuing payments dependent on a future event https://www.legislation.gov.uk/anaw/2017/1/section/19 - LTTA 2017 section 20 - estimating uncertain or unknown payment amounts https://www.legislation.gov.uk/anaw/2017/1/section/20 - LTTA 2017 section 21 - valuing annuities and other periodic payments https://www.legislation.gov.uk/anaw/2017/1/section/21 - LTTA 2017 section 44 - filing an LTT return within 30 days https://www.legislation.gov.uk/anaw/2017/1/section/44 - LTTA 2017 section 45 - when a land transaction must be reported https://www.legislation.gov.uk/anaw/2017/1/section/45 - LTTA 2017 section 47 - later returns when contingent payments change https://www.legislation.gov.uk/anaw/2017/1/section/47 - LTTA 2017 section 48 - repayments after contingent payments are reduced https://www.legislation.gov.uk/anaw/2017/1/section/48 - LTTA 2017 section 57 - paying LTT by the return filing date https://www.legislation.gov.uk/anaw/2017/1/section/57 - LTTA 2017 section 58 - requests to defer tax on uncertain payments https://www.legislation.gov.uk/anaw/2017/1/section/58 - LTTA 2017 section 59 - excluding annuities from deferred tax calculations https://www.legislation.gov.uk/anaw/2017/1/section/59 Guidance page from the Welsh Revenue Authority on this topic (guidance, not law): https://www.gov.wales/chargeable-consideration-technical-guidance#5178 HOW I WANT YOU TO ANSWER 1. Work from the legislation above. Read it before answering. Guidance from the Welsh Revenue Authority is its view of the law, not the law, and does not bind a tribunal or a court. 2. Tell me what the rule actually requires, in plain English. 3. Tell me which facts decide the answer, and which facts would change it. 4. Tell me what evidence I would need to support the position. 5. Be explicit about anything unsettled or fact-sensitive. Do not guess. 6. Your training data has a cutoff and SDLT rates and reliefs change at fiscal events. Say so if you are not sure the law is current. POINTS ALREADY KNOWN TO BE UNCERTAIN ON THIS TOPIC - The supplied statutory library contains no currency notice. The legislation in force on the effective date of the transaction should be checked before relying on this page. - Whether a payment is an annuity or another periodic payment can depend on the wording and commercial effect of the agreement. - A payment may be contingent, uncertain or both in everyday language. The statutory definitions and the facts decide how it is valued. Do not give me a conclusion you cannot support from the provisions above.
Legislation links show the Land Transaction Tax and Anti-avoidance of Devolved Taxes (Wales) Act 2017 as it stood on 2025-11-17. The law may have changed since, and the rules that apply are those in force on the date of your transaction. The official guidance this page is based on is here.
This page was last updated on 3 September 2026
Useful article? You may find it helpful to read the original guidance here: LTT on annuities: how periodic payments are valued
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