People buying homes in Wales for less than £225,000 will pay no tax, under new measures announced by the finance minister.

The threshold for paying Land Transaction Tax is being increased from £180,000 and the change will come into force from 10 October. There will also be a small increase in the rate of Land Transaction Tax for homes that cost more than £345,000.

The move is intended to ensure that the threshold for paying tax reflects the rise in prices of homes over the last two years.

People buying homes under £225,000 will not pay any Land Transaction Tax.

Anyone buying a home costing less than £345,000 will see a reduction in the tax they pay, up to a maximum of £1,575.

People buying homes worth more than £345,000 will see an increase – up to £550 – but these only represent around 15% of property transactions in Wales.

All other elements of Land Transaction Tax will remain unchanged, meaning there are no tax reductions provided to those purchasing second homes in Wales, unlike with stamp duty land tax in England.

The changes have been brought forward as a result of changes to stamp duty land tax (paid in England and Northern Ireland) announced by the UK government in last week’s financial statement.

The Welsh government says that it was considering making changes at its Budget later this year, but is making changes now to give clarity to the housing market.

Rebecca Evans, minister for finance and local government, said: “This is a change tailored to the unique needs of the housing market in Wales and contributes to our wider vision of a fairer tax system. 61% of homebuyers will not pay tax on their purchase. These changes will get support to people who need it and help with the impact of rising interest rates.

“We also know that helping people at the lower end of the market will have a particular benefit for first time buyers. We help people buy their first home in a number of different ways, including shared ownership and help to buy schemes, and I am pleased to be able to extend that support through these changes to Land Transaction Tax.”

In response to the Welsh government’s announcement on changes to Land Transaction Tax, Nathan Emerson, CEO of Propertymark, commented: “Wales has seen large growth in house prices due to spikes in demand, so it is therefore logical that the tax threshold would be changed in line with current property values.

“When LTT incentives are created, they are largely aimed at first time buyers, but incentives for downsizers or last time movers would encourage movement in the latter part of the market, which when blocked stops movement further down for second steppers and first-time buyers, causing stagnation as buyers have nothing to move on to.”