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Wales Income Tax

Wales will devolve its income tax rates from April 2019.

From 6 April 2019, some of the Income Tax paid by people living in Wales will directly fund Welsh public services.

Since the replacement of Stamp Duty Land Tax with Welsh Land Transaction Tax, we have seen a further devolvement of income tax from the UK government.

The UK government has passed a part of its income tax powers over to the Welsh government, meaning all tax will continue to be collected by HMRC (UK), but a proportion of it will go directly to the Welsh government.

From April a reduced amount of tax will be paid to the UK government. HMRC will thereafter reduce the amount of income tax for Welsh residents by 10%.

From then on, the Welsh government will add a Welsh rate to the UK rate, and this will total the amount liable from the Welsh taxpayer.

Currently, the Welsh government propose to set the Welsh rate to 10%, meaning that tax rates will be identical to those paid at the moment. Please be mindful that there is every chance these rates will vary in the future, although it isn't expected that changes will be seen before 6 April 2020.

For the vast majority of people, it will be very straightforward to determine whether they are considered a Welsh taxpayer. However, the rules are quite complex for others, for example, those with two homes. The rules will, therefore, rely on the location of their “main place of residence.” 

HMRC is encouraging employers to remind employees of the need to notify changes of address. From 6 April 2019, employers will be receiving amended coding notices and documentation for 'Welsh' employees as they will have PAYE codes with a “C” prefix going forward.

Although the rates remain effectively unchanged at the moment, it is important that employers deal with these codes correctly. If an employer, English or Welsh, has Welsh taxpayers in their workforce they need to ensure their payroll provider and/or their payroll software is aware of and able to deal with these new codes. 

If you are unsure if this change affects you, we advise you speak to your accountant and/or payroll administrator for further guidance on how to administer this change.

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