HRMC has written to two million taxpayers in Wales concerning the introduction of the Welsh rates of Income Tax (WRIT) from 6 April 2019. The WRIT will be payable on the non-savings and non-dividend income of those defined as Welsh taxpayers and WRIT taxpayers will receive a new tax code, starting with C for Cymru. A proportion of the revenue from the Welsh rates of Income Tax will go to the Welsh Government.
To effect this change the UK government will reduce each of the 3 rates of Income Tax – basic, higher and additional rate – paid by Welsh taxpayers by 10p from next April. Each year, the Welsh Government will then decide the 3 Welsh rates of Income Tax (the Welsh basic rate; the Welsh higher rate; and the Welsh additional rate), which will be added to the reduced UK rates. The combination of reduced UK rates plus the Welsh rates will determine the overall rate of Income Tax paid by Welsh taxpayers. The WRIT will be administered by HMRC on behalf of the Welsh Government.
The Welsh Government has proposed to set the Welsh rates of Income Tax at 10p for 2019-20. This means that the rates of Income Tax paid by Welsh taxpayers, would continue to be the same as those paid by English and Northern Irish taxpayers at least for the first year. As the Welsh rates of Income Tax are not a discrete tax they continue to be covered by existing UK double taxation agreements.
The definition of a Welsh taxpayer is generally focused on the question of where a taxpayer lives. If the taxpayer has one place of residence or a main residence in Wales, then they will be defined as a Welsh taxpayer.
