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29 March 2019
On 6 April 2019, Welsh Rates of Income Tax (WRIT) will be introduced in Wales for 2019-20 onwards.
What are Welsh Rates of Income Tax?
The Welsh Government will be responsible for setting WRIT in Wales. Currently, all Welsh taxpayers pay income tax to the UK Government.
From April 2019, the UK Government will reduce each of the three rates of income tax paid by Welsh taxpayers by 10p. The Welsh Government will then introduce its own rates in each tax band, which was debated in the Welsh Assembly in January 2019 and set at 10p.
What will this mean for Welsh taxpayers?
This means that Welsh taxpayers will pay 10p of each income tax rate to Welsh Government with the remainder paid to UK government. There would be no impact on Welsh taxpayers as income tax rates would remain the same as what is currently being paid to UK Government.
The Minister for Finance and Trefnydd stated in an Assembly debate that Welsh Government has ‘no plans to increase income tax during this Assembly term’, which is 2021 at the earliest.
What new powers will Welsh Government have?
Welsh Government will only have powers to change the Welsh Rates of Income Tax and not income tax bands or the personal allowance threshold, which will remain with UK Government.
How will WRIT be collected?
HMRC will be responsible for collecting income tax with WRIT revenue being transferred to Welsh Government. Welsh taxpayers will therefore see no changes to how the tax is collected.
How do I know if I am a Welsh taxpayer?
Individuals will be identified as a Welsh taxpayer for WRIT purposes if their main residence is in Wales. Where an individual works will have no bearing on their taxpayer status, which means if an individual works in England but lives in Wales they will be classified as a Welsh taxpayer.
Welsh taxpayers will also receive a new tax code that begins with ‘C’ to ensure they pay the right tax rates.
How much income tax will I pay to the UK and Welsh Governments?
The Research Service has developed an income tax tool with the Wales Governance Centre which estimates how much a Welsh taxpayer would pay to both the UK and Welsh Governments.
What would the impact of changing Welsh income tax rates be?
The impact of changes to the Welsh rate of income tax on Welsh Government and individuals’ income can also be explored through the income tax tool.