The new Welsh Income Tax code is the prefix ‘c’; like the ‘s’ to denote Scottish Income Tax. You may have been expecting ‘w’, for ‘Wales’, but Cymru is ‘Wales’ in Welsh, so ‘c’ makes more sense. This is particularly important news for all those involved in payroll in Wales. But all taxpayers should be aware of any tax code changes so you can make sure that yours is correct.
When does this tax code change come into effect?
Two new Welsh taxes were implemented from 1st April 2018. The stamp duty land tax is now replaced by the land transaction tax and the landfill disposals tax takes over from the previous landfill tax.
At the start of the next financial year, April 2019, the power to set income tax rates is also going to be devolved to the Welsh government. This is when we will start to see the usage of the new ‘c’ prefix, to show that a Welsh tax code is being used.
How will the devolved income tax rates work?
Firstly, the UK government will take 10p off the current UK income tax rates. So, everyone in the basic, higher and additional rate will have their payable amount reduced by 10%; or 10p in the pound. Next, the Welsh government will decide how much those in each separate band must pay as Welsh Income Tax. Welsh taxpayers will pay the total of the reduced UK income tax rate and the Welsh Income Tax rate appropriate to their tax band.
So, if the Welsh government sets the Welsh rate at 10%, you will pay the same amount as you do now. If it goes to 11%, then the rates will be 21%, 41% and 46% for the basic, higher and additional tax bands respectively, for example.
The taxpayers themselves don’t have to sort out two different income tax payments. HMRC are still in charge of collecting and administering the tax payments. Individuals will just pay their total amount in the way they are doing now and any redistribution of monies will happen between governments.
All of the money raised by the Welsh Income Tax rate will be paid straight to the National Assembly for Wales by HMRC.
As reported by HMRC online, Elizabeth Truss (Chief Secretary to the Treasury) said: “We are committed to giving the National Assembly for Wales more responsibility to raise its own funding. And that is why further income tax powers will follow next year. This will give the Welsh Government greater powers to shape their economy.”
Professor Mark Drakeford, Welsh Government Finance Secretary, echoed her positive attitude: “The devolution of these taxes represents a significant milestone for Wales, helping us to make Wales a fairer nation and to grow the Welsh economy.”
I’m a Welsh taxpayer, do I need to do anything to be ready for this income tax change?
All you have to do, as a Welsh taxpayer, is make sure that you have a Personal Tax Account set up and that HMRC have your correct address. They will then administer the whole process. As usual, it is up to you to keep an eye on your tax code and make sure that you are paying the correct amount of tax.
