As of April 6th, the Welsh Assembly’s new devolved taxation powers come into effect. This means that a designated amount of the income tax raised in Wales is directly controlled by the Welsh Assembly. The rest is still under the control of the UK parliament.
What does this change actually mean?
The devolution of income tax powers to the Welsh Assembly means that the central UK government no longer gets all of the income tax collected in Wales. Each of the three income tax bands has effectively been decreased by 10p (In the tax £1).
This 10p of every tax £1 collected by HMRC, and any extra amounts, go straight to the Welsh government.
HMRC are still the administrators of income tax across the UK and will collect it from all Welsh Basic Rate, Higher Rate and Additional rate taxpayers.
Welsh rates of income tax
The tax bands for Welsh income tax payments are the same as Northern Ireland and England. Scotland now have their own, different ratings system.
This table shows the income of each tax bracket, rate of tax you pay for each band and the split between how much goes to the respective UK and Welsh governments.
|Rate of income tax paid||Annual Income Bracket||To UK government||To Welsh government|
|Basic Rate||20%||£12,500 – £50,000
|10p per £1||10p per £1|
|Higher Rate||40%||£50,000 – £150,000||30p per £1||10p per £1|
|Additional Rate||45%||Over £150,000||35p per £1||10p per £1|
The Personal Allowance in Wales is the same as the rest of the UK, currently £12,500. This means that you can earn £12,500 before you are required to pay any income tax.
When do I pay Welsh income tax?
You pay Welsh income tax if your main home is in Wales, or if you spend more than half the year in Wales. Your tax code will begin with a C. if you are paid through PAYE and are paying Welsh income tax. (‘C’ because Wales in Welsh is Cymru.) If you are in the self assessment system, you will just need to tick the box to say you are paying Welsh income tax.
What difference does this make to Wales?
The Welsh government can decide to use its “income tax varying powers” to raise more money for Wales. As reported by the BBC: “Putting 1p per pound on the basic rate of income tax would raise about £200m for the Welsh Government.” This translates as an extra £5.00 per week on Welsh taxpayers’ bills. Part of their new devolved powers also means that the Welsh government have double their borrowing power, up to £1billion, to fund “building and infrastructure projects”.
As they assume more financial power over their country’s future, the Welsh government also become more accountable for how this money is spent. The question of raising income tax rates will undoubtedly become one of the big issues of the next Welsh Assembly election in 2021.